Correlation Between 532716AN7 and Design Therapeutics

Can any of the company-specific risk be diversified away by investing in both 532716AN7 and Design Therapeutics 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 532716AN7 and Design Therapeutics into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between L Brands 76 and Design Therapeutics, you can compare the effects of market volatilities on 532716AN7 and Design Therapeutics 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 532716AN7 with a short position of Design Therapeutics. Check out your portfolio center. Please also check ongoing floating volatility patterns of 532716AN7 and Design Therapeutics.

Diversification Opportunities for 532716AN7 and Design Therapeutics

-0.77

Correlation Coefficient

532716AN7  Design Therapeutics

Pay attention - limited upside

The 3 months correlation between 532716AN7 and Design is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding L Brands 76 and Design Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Design Therapeutics and 532716AN7 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 L Brands 76 are associated (or correlated) with Design Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Design Therapeutics has no effect on the direction of 532716AN7 i.e., 532716AN7 and Design Therapeutics go up and down completely randomly.

Pair Corralation between 532716AN7 and Design Therapeutics

Assuming the 90 days trading horizon L Brands 76 is expected to generate 0.18 times more return on investment than Design Therapeutics. However, L Brands 76 is 5.43 times less risky than Design Therapeutics. It trades about -0.07 of its potential returns per unit of risk. Design Therapeutics is currently generating about -0.05 per unit of risk. If you would invest  10,168  in L Brands 76 on December 25, 2024 and sell it today you would lose (388.00) from holding L Brands 76 or give up 3.82% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	84.75%
Values	Daily Returns

L Brands 76  vs.  Design Therapeutics

L Brands 76

Risk-Adjusted Performance

Weak

Over the last 90 days L Brands 76 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 532716AN7 is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Design Therapeutics

Risk-Adjusted Performance

Very Weak

Over the last 90 days Design Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with 532716AN7 and Design Therapeutics

The main advantage of trading using opposite 532716AN7 and Design Therapeutics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 532716AN7 position performs unexpectedly, Design Therapeutics 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 Design Therapeutics will offset losses from the drop in Design Therapeutics' long position.

The idea behind L Brands 76 and Design Therapeutics 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.