Correlation Between IMedia Brands and SIGNA Sports

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

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

Diversification Opportunities for IMedia Brands and SIGNA Sports

0.84

Correlation Coefficient

IMedia Brands  SIGNA Sports

Very poor diversification

The 3 months correlation between IMedia and SIGNA is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding IMedia Brands and SIGNA Sports United in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SIGNA Sports United and IMedia Brands 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 IMedia Brands are associated (or correlated) with SIGNA Sports. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SIGNA Sports United has no effect on the direction of IMedia Brands i.e., IMedia Brands and SIGNA Sports go up and down completely randomly.

Pair Corralation between IMedia Brands and SIGNA Sports

Given the investment horizon of 90 days IMedia Brands is expected to under-perform the SIGNA Sports. In addition to that, IMedia Brands is 2.4 times more volatile than SIGNA Sports United. It trades about -0.11 of its total potential returns per unit of risk. SIGNA Sports United is currently generating about -0.05 per unit of volatility. If you would invest  488.00  in SIGNA Sports United on September 27, 2024 and sell it today you would lose (215.00) from holding SIGNA Sports United or give up 44.06% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	99.27%
Values	Daily Returns

IMedia Brands  vs.  SIGNA Sports United

IMedia Brands

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days IMedia Brands has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong fundamental drivers, IMedia Brands is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

SIGNA Sports United

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SIGNA Sports United has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, SIGNA Sports is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with IMedia Brands and SIGNA Sports

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

The idea behind IMedia Brands and SIGNA Sports United 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.