Correlation Between Destination and Torrid Holdings

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

By analyzing existing cross correlation between Destination XL Group and Torrid Holdings, you can compare the effects of market volatilities on Destination and Torrid Holdings 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 Destination with a short position of Torrid Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Destination and Torrid Holdings.

Diversification Opportunities for Destination and Torrid Holdings

-0.27

Correlation Coefficient

Destination  Torrid Holdings

Very good diversification

The 3 months correlation between Destination and Torrid is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Destination XL Group and Torrid Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Torrid Holdings and Destination 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 Destination XL Group are associated (or correlated) with Torrid Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Torrid Holdings has no effect on the direction of Destination i.e., Destination and Torrid Holdings go up and down completely randomly.

Pair Corralation between Destination and Torrid Holdings

Given the investment horizon of 90 days Destination XL Group is expected to under-perform the Torrid Holdings. But the stock apears to be less risky and, when comparing its historical volatility, Destination XL Group is 1.74 times less risky than Torrid Holdings. The stock trades about -0.04 of its potential returns per unit of risk. The Torrid Holdings is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  742.00  in Torrid Holdings on September 29, 2024 and sell it today you would lose (214.00) from holding Torrid Holdings or give up 28.84% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Destination XL Group  vs.  Torrid Holdings

Destination XL Group

Risk-Adjusted Performance

0 of 100

Very Weak

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

Torrid Holdings

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Torrid Holdings are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Torrid Holdings showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Destination and Torrid Holdings

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

The idea behind Destination XL Group and Torrid Holdings 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.