Correlation Between Designer Brands and 8426EPAD0

Can any of the company-specific risk be diversified away by investing in both Designer Brands and 8426EPAD0 at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Designer Brands and 8426EPAD0 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Designer Brands and US8426EPAD09, you can compare the effects of market volatilities on Designer Brands and 8426EPAD0 and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Designer Brands with a short position of 8426EPAD0. Check out your portfolio center. Please also check ongoing floating volatility patterns of Designer Brands and 8426EPAD0.

Diversification Opportunities for Designer Brands and 8426EPAD0

0.02

Correlation Coefficient

Designer Brands  8426EPAD0

Significant diversification

The 3 months correlation between Designer and 8426EPAD0 is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Designer Brands and US8426EPAD09 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US8426EPAD09 and Designer Brands is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Designer Brands are associated (or correlated) with 8426EPAD0. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US8426EPAD09 has no effect on the direction of Designer Brands i.e., Designer Brands and 8426EPAD0 go up and down completely randomly.

Pair Corralation between Designer Brands and 8426EPAD0

Considering the 90-day investment horizon Designer Brands is expected to under-perform the 8426EPAD0. In addition to that, Designer Brands is 5.65 times more volatile than US8426EPAD09. It trades about -0.13 of its total potential returns per unit of risk. US8426EPAD09 is currently generating about 0.05 per unit of volatility. If you would invest  8,217  in US8426EPAD09 on December 26, 2024 and sell it today you would earn a total of  166.00  from holding US8426EPAD09 or generate 2.02% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	88.52%
Values	Daily Returns

Designer Brands  vs.  US8426EPAD09

Designer Brands

Risk-Adjusted Performance

Very Weak

Over the last 90 days Designer Brands has generated negative risk-adjusted returns adding no value to investors with long positions. Despite abnormal performance in the last few months, the Stock's fundamental drivers remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

US8426EPAD09

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in US8426EPAD09 are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, 8426EPAD0 is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Designer Brands and 8426EPAD0

The main advantage of trading using opposite Designer Brands and 8426EPAD0 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Designer Brands position performs unexpectedly, 8426EPAD0 can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in 8426EPAD0 will offset losses from the drop in 8426EPAD0's long position.

The idea behind Designer Brands and US8426EPAD09 pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.