Correlation Between El Puerto and Dillards

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

By analyzing existing cross correlation between El Puerto de and Dillards, you can compare the effects of market volatilities on El Puerto and Dillards 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 El Puerto with a short position of Dillards. Check out your portfolio center. Please also check ongoing floating volatility patterns of El Puerto and Dillards.

Diversification Opportunities for El Puerto and Dillards

-0.66

Correlation Coefficient

El Puerto  Dillards

Excellent diversification

The 3 months correlation between ELPQF and Dillards is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding El Puerto de and Dillards in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dillards and El Puerto 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 El Puerto de are associated (or correlated) with Dillards. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dillards has no effect on the direction of El Puerto i.e., El Puerto and Dillards go up and down completely randomly.

Pair Corralation between El Puerto and Dillards

Assuming the 90 days horizon El Puerto is expected to generate 3.11 times less return on investment than Dillards. In addition to that, El Puerto is 1.18 times more volatile than Dillards. It trades about 0.01 of its total potential returns per unit of risk. Dillards is currently generating about 0.04 per unit of volatility. If you would invest  33,674  in Dillards on October 5, 2024 and sell it today you would earn a total of  11,397  from holding Dillards or generate 33.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	63.36%
Values	Daily Returns

El Puerto de  vs.  Dillards

El Puerto de

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days El Puerto de has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Dillards

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dillards are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating fundamental indicators, Dillards unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with El Puerto and Dillards

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

The idea behind El Puerto de and Dillards 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.