Correlation Between Design Therapeutics and 532716AN7

Can any of the company-specific risk be diversified away by investing in both Design Therapeutics and 532716AN7 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 Design Therapeutics and 532716AN7 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Design Therapeutics and L Brands 76, you can compare the effects of market volatilities on Design Therapeutics and 532716AN7 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 Design Therapeutics with a short position of 532716AN7. Check out your portfolio center. Please also check ongoing floating volatility patterns of Design Therapeutics and 532716AN7.

Diversification Opportunities for Design Therapeutics and 532716AN7

0.09

Correlation Coefficient

Design Therapeutics  532716AN7

Significant diversification

The 3 months correlation between Design and 532716AN7 is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Design Therapeutics and L Brands 76 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on L Brands 76 and Design Therapeutics 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 Design Therapeutics are associated (or correlated) with 532716AN7. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of L Brands 76 has no effect on the direction of Design Therapeutics i.e., Design Therapeutics and 532716AN7 go up and down completely randomly.

Pair Corralation between Design Therapeutics and 532716AN7

Given the investment horizon of 90 days Design Therapeutics is expected to generate 5.0 times more return on investment than 532716AN7. However, Design Therapeutics is 5.0 times more volatile than L Brands 76. It trades about 0.1 of its potential returns per unit of risk. L Brands 76 is currently generating about -0.04 per unit of risk. If you would invest  467.00  in Design Therapeutics on October 10, 2024 and sell it today you would earn a total of  125.00  from holding Design Therapeutics or generate 26.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	78.69%
Values	Daily Returns

Design Therapeutics  vs.  L Brands 76

Design Therapeutics

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Design Therapeutics are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady technical and fundamental indicators, Design Therapeutics displayed solid returns over the last few months and may actually be approaching a breakup point.

L Brands 76

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days L Brands 76 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 532716AN7 is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Design Therapeutics and 532716AN7

The main advantage of trading using opposite Design Therapeutics and 532716AN7 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Design Therapeutics position performs unexpectedly, 532716AN7 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 532716AN7 will offset losses from the drop in 532716AN7's long position.

The idea behind Design Therapeutics and L Brands 76 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.