Correlation Between G III and Destination

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

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

Diversification Opportunities for G III and Destination

-0.19

Correlation Coefficient

G III  Destination

Good diversification

The 3 months correlation between GIII and Destination is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding G III Apparel Group and Destination XL Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Destination XL Group and G III 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 G III Apparel Group are associated (or correlated) with Destination. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Destination XL Group has no effect on the direction of G III i.e., G III and Destination go up and down completely randomly.

Pair Corralation between G III and Destination

Given the investment horizon of 90 days G III Apparel Group is expected to generate 0.58 times more return on investment than Destination. However, G III Apparel Group is 1.72 times less risky than Destination. It trades about 0.07 of its potential returns per unit of risk. Destination XL Group is currently generating about 0.01 per unit of risk. If you would invest  2,961  in G III Apparel Group on October 8, 2024 and sell it today you would earn a total of  253.00  from holding G III Apparel Group or generate 8.54% return on investment over 90 days.

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

G III Apparel Group  vs.  Destination XL Group

G III Apparel

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in G III Apparel Group are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating forward indicators, G III may actually be approaching a critical reversion point that can send shares even higher in February 2025.

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.

Pair Trading with G III and Destination

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

The idea behind G III Apparel Group and Destination XL Group 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 Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .