Correlation Between Eastern and Designer Brands

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

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

Diversification Opportunities for Eastern and Designer Brands

0.38

Correlation Coefficient

Eastern  Designer Brands

Weak diversification

The 3 months correlation between Eastern and Designer is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Eastern Co and Designer Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Designer Brands and Eastern 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 Eastern Co are associated (or correlated) with Designer Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Designer Brands has no effect on the direction of Eastern i.e., Eastern and Designer Brands go up and down completely randomly.

Pair Corralation between Eastern and Designer Brands

Considering the 90-day investment horizon Eastern Co is expected to under-perform the Designer Brands. But the stock apears to be less risky and, when comparing its historical volatility, Eastern Co is 1.86 times less risky than Designer Brands. The stock trades about -0.09 of its potential returns per unit of risk. The Designer Brands is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  562.00  in Designer Brands on October 24, 2024 and sell it today you would earn a total of  10.00  from holding Designer Brands or generate 1.78% return on investment over 90 days.

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

Eastern Co  vs.  Designer Brands

Eastern

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eastern Co 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 primary indicators remain quite persistent which may send shares a bit higher in February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Designer Brands

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Designer Brands are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly abnormal fundamental drivers, Designer Brands may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Eastern and Designer Brands

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

The idea behind Eastern Co and Designer Brands 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.