Correlation Between Designer Brands and Vantage Drilling

Can any of the company-specific risk be diversified away by investing in both Designer Brands and Vantage Drilling 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 Vantage Drilling into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Designer Brands and Vantage Drilling International, you can compare the effects of market volatilities on Designer Brands and Vantage Drilling 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 Vantage Drilling. Check out your portfolio center. Please also check ongoing floating volatility patterns of Designer Brands and Vantage Drilling.

Diversification Opportunities for Designer Brands and Vantage Drilling

0.23

Correlation Coefficient

Designer Brands  Vantage Drilling

Modest diversification

The 3 months correlation between Designer and Vantage is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Designer Brands and Vantage Drilling International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vantage Drilling Int 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 Vantage Drilling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vantage Drilling Int has no effect on the direction of Designer Brands i.e., Designer Brands and Vantage Drilling go up and down completely randomly.

Pair Corralation between Designer Brands and Vantage Drilling

Considering the 90-day investment horizon Designer Brands is expected to under-perform the Vantage Drilling. But the stock apears to be less risky and, when comparing its historical volatility, Designer Brands is 1.61 times less risky than Vantage Drilling. The stock trades about 0.0 of its potential returns per unit of risk. The Vantage Drilling International is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,550  in Vantage Drilling International on October 10, 2024 and sell it today you would earn a total of  1,000.00  from holding Vantage Drilling International or generate 64.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Designer Brands  vs.  Vantage Drilling International

Designer Brands

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Designer Brands has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong fundamental drivers, Designer Brands is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Vantage Drilling Int

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vantage Drilling International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Vantage Drilling is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Designer Brands and Vantage Drilling

The main advantage of trading using opposite Designer Brands and Vantage Drilling positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Designer Brands position performs unexpectedly, Vantage Drilling 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 Vantage Drilling will offset losses from the drop in Vantage Drilling's long position.

The idea behind Designer Brands and Vantage Drilling International 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.