Correlation Between Zumiez and Xcel Brands

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Can any of the company-specific risk be diversified away by investing in both Zumiez and Xcel 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 Zumiez and Xcel Brands into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Zumiez Inc and Xcel Brands, you can compare the effects of market volatilities on Zumiez and Xcel 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 Zumiez with a short position of Xcel Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zumiez and Xcel Brands.

Diversification Opportunities for Zumiez and Xcel Brands

ZumiezXcelDiversified AwayZumiezXcelDiversified Away100%
0.79
  Correlation Coefficient

Poor diversification

The 3 months correlation between Zumiez and Xcel is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Zumiez Inc and Xcel Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xcel Brands and Zumiez 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 Zumiez Inc are associated (or correlated) with Xcel Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xcel Brands has no effect on the direction of Zumiez i.e., Zumiez and Xcel Brands go up and down completely randomly.

Pair Corralation between Zumiez and Xcel Brands

Given the investment horizon of 90 days Zumiez Inc is expected to generate 0.43 times more return on investment than Xcel Brands. However, Zumiez Inc is 2.35 times less risky than Xcel Brands. It trades about -0.12 of its potential returns per unit of risk. Xcel Brands is currently generating about -0.08 per unit of risk. If you would invest  2,160  in Zumiez Inc on October 25, 2024 and sell it today you would lose (567.00) from holding Zumiez Inc or give up 26.25% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Zumiez Inc  vs.  Xcel Brands

 Performance 
JavaScript chart by amCharts 3.21.15NovDec2025 -50-40-30-20-100
JavaScript chart by amCharts 3.21.15ZUMZ XELB
       Timeline  
Zumiez Inc 

Risk-Adjusted Performance

0 of 100

 
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Very Weak
Over the last 90 days Zumiez Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's primary indicators remain fairly 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.
JavaScript chart by amCharts 3.21.15NovDecJanDecJan15161718192021222324
Xcel Brands 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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.
JavaScript chart by amCharts 3.21.15NovDecJanDecJan0.40.50.60.70.8

Zumiez and Xcel Brands Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-6.15-4.6-3.06-1.520.01.322.664.05.33 0.0050.0100.0150.0200.0250.030
JavaScript chart by amCharts 3.21.15ZUMZ XELB
       Returns  

Pair Trading with Zumiez and Xcel Brands

The main advantage of trading using opposite Zumiez and Xcel Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Zumiez position performs unexpectedly, Xcel 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 Xcel Brands will offset losses from the drop in Xcel Brands' long position.
The idea behind Zumiez Inc and Xcel 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.

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