Correlation Between Townsquare Media and Designer Brands

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

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

Diversification Opportunities for Townsquare Media and Designer Brands

0.32

Correlation Coefficient

Townsquare Media  Designer Brands

Weak diversification

The 3 months correlation between Townsquare and Designer is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Townsquare Media and Designer Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Designer Brands and Townsquare Media 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 Townsquare Media 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 Townsquare Media i.e., Townsquare Media and Designer Brands go up and down completely randomly.

Pair Corralation between Townsquare Media and Designer Brands

Considering the 90-day investment horizon Townsquare Media is expected to generate 0.63 times more return on investment than Designer Brands. However, Townsquare Media is 1.6 times less risky than Designer Brands. It trades about 0.04 of its potential returns per unit of risk. Designer Brands is currently generating about 0.0 per unit of risk. If you would invest  667.00  in Townsquare Media on October 11, 2024 and sell it today you would earn a total of  266.00  from holding Townsquare Media or generate 39.88% return on investment over 90 days.

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

Townsquare Media  vs.  Designer Brands

Townsquare Media

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Townsquare Media has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Designer Brands

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Townsquare Media and Designer Brands

The main advantage of trading using opposite Townsquare Media and Designer Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Townsquare Media 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 Townsquare Media 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 Stocks Directory module to find actively traded stocks across global markets.