Correlation Between Childrens Place and Duluth Holdings

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

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

Diversification Opportunities for Childrens Place and Duluth Holdings

0.42

Correlation Coefficient

Childrens Place  Duluth Holdings

Very weak diversification

The 3 months correlation between Childrens and Duluth is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Childrens Place and Duluth Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Duluth Holdings and Childrens Place 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 Childrens Place are associated (or correlated) with Duluth Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Duluth Holdings has no effect on the direction of Childrens Place i.e., Childrens Place and Duluth Holdings go up and down completely randomly.

Pair Corralation between Childrens Place and Duluth Holdings

Given the investment horizon of 90 days Childrens Place is expected to generate 2.29 times more return on investment than Duluth Holdings. However, Childrens Place is 2.29 times more volatile than Duluth Holdings. It trades about -0.02 of its potential returns per unit of risk. Duluth Holdings is currently generating about -0.11 per unit of risk. If you would invest  1,354  in Childrens Place on October 6, 2024 and sell it today you would lose (256.00) from holding Childrens Place or give up 18.91% of portfolio value over 90 days.

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

Childrens Place  vs.  Duluth Holdings

Childrens Place

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Childrens Place has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Duluth Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Duluth Holdings 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 fairly strong which may send shares a bit higher in February 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Childrens Place and Duluth Holdings

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

The idea behind Childrens Place and Duluth Holdings 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.