Correlation Between Virgin Group and Designer Brands

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

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

Diversification Opportunities for Virgin Group and Designer Brands

-0.62

Correlation Coefficient

Virgin Group  Designer Brands

Excellent diversification

The 3 months correlation between Virgin and Designer is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Virgin Group Acquisition and Designer Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Designer Brands and Virgin Group 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 Virgin Group Acquisition 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 Virgin Group i.e., Virgin Group and Designer Brands go up and down completely randomly.

Pair Corralation between Virgin Group and Designer Brands

Given the investment horizon of 90 days Virgin Group Acquisition is expected to generate 0.99 times more return on investment than Designer Brands. However, Virgin Group Acquisition is 1.01 times less risky than Designer Brands. It trades about 0.08 of its potential returns per unit of risk. Designer Brands is currently generating about -0.13 per unit of risk. If you would invest  138.00  in Virgin Group Acquisition on December 20, 2024 and sell it today you would earn a total of  22.00  from holding Virgin Group Acquisition or generate 15.94% return on investment over 90 days.

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

Virgin Group Acquisition  vs.  Designer Brands

Virgin Group Acquisition

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Virgin Group Acquisition are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Virgin Group showed solid returns over the last few months and may actually be approaching a breakup point.

Designer Brands

Risk-Adjusted Performance

Very Weak

Over the last 90 days Designer Brands has generated negative risk-adjusted returns adding no value to investors with long positions. Despite abnormal performance in the last few months, the Stock's fundamental drivers remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Virgin Group and Designer Brands

The main advantage of trading using opposite Virgin Group and Designer Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Virgin Group 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 Virgin Group Acquisition 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.

Check out your portfolio center.

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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.