Correlation Between Digital Brands and Ralph Lauren

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

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

Diversification Opportunities for Digital Brands and Ralph Lauren

-0.81

Correlation Coefficient

Digital Brands  Ralph Lauren

Pay attention - limited upside

The 3 months correlation between Digital and Ralph is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding Digital Brands Group and Ralph Lauren Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ralph Lauren Corp and Digital 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 Digital Brands Group are associated (or correlated) with Ralph Lauren. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ralph Lauren Corp has no effect on the direction of Digital Brands i.e., Digital Brands and Ralph Lauren go up and down completely randomly.

Pair Corralation between Digital Brands and Ralph Lauren

Given the investment horizon of 90 days Digital Brands Group is expected to under-perform the Ralph Lauren. In addition to that, Digital Brands is 9.03 times more volatile than Ralph Lauren Corp. It trades about -0.11 of its total potential returns per unit of risk. Ralph Lauren Corp is currently generating about 0.2 per unit of volatility. If you would invest  18,344  in Ralph Lauren Corp on September 17, 2024 and sell it today you would earn a total of  4,401  from holding Ralph Lauren Corp or generate 23.99% return on investment over 90 days.

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

Digital Brands Group  vs.  Ralph Lauren Corp

Digital Brands Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Digital Brands Group 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 technical and fundamental indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Ralph Lauren Corp

Risk-Adjusted Performance

15 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Ralph Lauren Corp are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite quite inconsistent essential indicators, Ralph Lauren disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Digital Brands and Ralph Lauren

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

The idea behind Digital Brands Group and Ralph Lauren Corp 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.