Correlation Between Xcel Brands and Ermenegildo Zegna

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

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

Diversification Opportunities for Xcel Brands and Ermenegildo Zegna

-0.34

Correlation Coefficient

Xcel Brands  Ermenegildo Zegna

Very good diversification

The 3 months correlation between Xcel and Ermenegildo is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Xcel Brands and Ermenegildo Zegna NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ermenegildo Zegna and Xcel 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 Xcel Brands are associated (or correlated) with Ermenegildo Zegna. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ermenegildo Zegna has no effect on the direction of Xcel Brands i.e., Xcel Brands and Ermenegildo Zegna go up and down completely randomly.

Pair Corralation between Xcel Brands and Ermenegildo Zegna

Given the investment horizon of 90 days Xcel Brands is expected to under-perform the Ermenegildo Zegna. In addition to that, Xcel Brands is 6.4 times more volatile than Ermenegildo Zegna NV. It trades about -0.03 of its total potential returns per unit of risk. Ermenegildo Zegna NV is currently generating about -0.13 per unit of volatility. If you would invest  849.00  in Ermenegildo Zegna NV on October 8, 2024 and sell it today you would lose (53.00) from holding Ermenegildo Zegna NV or give up 6.24% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.0%
Values	Daily Returns

Xcel Brands  vs.  Ermenegildo Zegna NV

Xcel Brands

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Xcel Brands 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 essential indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Ermenegildo Zegna

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ermenegildo Zegna NV has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's technical and fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Xcel Brands and Ermenegildo Zegna

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

The idea behind Xcel Brands and Ermenegildo Zegna NV 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.