Correlation Between Destination and Victorias Secret

Can any of the company-specific risk be diversified away by investing in both Destination and Victorias Secret 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 Victorias Secret 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 Victorias Secret Co, you can compare the effects of market volatilities on Destination and Victorias Secret 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 Victorias Secret. Check out your portfolio center. Please also check ongoing floating volatility patterns of Destination and Victorias Secret.

Diversification Opportunities for Destination and Victorias Secret

-0.47

Correlation Coefficient

Destination  Victorias Secret

Very good diversification

The 3 months correlation between Destination and Victorias is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Destination XL Group and Victorias Secret Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Victorias Secret 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 Victorias Secret. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Victorias Secret has no effect on the direction of Destination i.e., Destination and Victorias Secret go up and down completely randomly.

Pair Corralation between Destination and Victorias Secret

Given the investment horizon of 90 days Destination XL Group is expected to generate 1.23 times more return on investment than Victorias Secret. However, Destination is 1.23 times more volatile than Victorias Secret Co. It trades about 0.13 of its potential returns per unit of risk. Victorias Secret Co is currently generating about -0.31 per unit of risk. If you would invest  261.00  in Destination XL Group on October 22, 2024 and sell it today you would earn a total of  15.00  from holding Destination XL Group or generate 5.75% return on investment over 90 days.

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

Destination XL Group  vs.  Victorias Secret Co

Destination XL Group

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Destination XL Group are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Victorias Secret

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Victorias Secret Co are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain fundamental indicators, Victorias Secret displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Destination and Victorias Secret

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

The idea behind Destination XL Group and Victorias Secret Co 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.