Correlation Between Designer Brands and Eastern
Can any of the company-specific risk be diversified away by investing in both Designer Brands and Eastern 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 Designer Brands and Eastern into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Designer Brands and Eastern Co, you can compare the effects of market volatilities on Designer Brands and Eastern 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 Designer Brands with a short position of Eastern. Check out your portfolio center. Please also check ongoing floating volatility patterns of Designer Brands and Eastern.
Diversification Opportunities for Designer Brands and Eastern
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Designer and Eastern is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Designer Brands and Eastern Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eastern and Designer 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 Designer Brands are associated (or correlated) with Eastern. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eastern has no effect on the direction of Designer Brands i.e., Designer Brands and Eastern go up and down completely randomly.
Pair Corralation between Designer Brands and Eastern
Considering the 90-day investment horizon Designer Brands is expected to generate 1.86 times more return on investment than Eastern. However, Designer Brands is 1.86 times more volatile than Eastern Co. It trades about 0.14 of its potential returns per unit of risk. Eastern Co is currently generating about -0.03 per unit of risk. If you would invest 512.00 in Designer Brands on September 5, 2024 and sell it today you would earn a total of 69.00 from holding Designer Brands or generate 13.48% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Designer Brands vs. Eastern Co
Performance |
Timeline |
Designer Brands |
Eastern |
Designer Brands and Eastern Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Designer Brands and Eastern
The main advantage of trading using opposite Designer Brands and Eastern positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Designer Brands position performs unexpectedly, Eastern 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 Eastern will offset losses from the drop in Eastern's long position.Designer Brands vs. Appian Corp | Designer Brands vs. Okta Inc | Designer Brands vs. MongoDB | Designer Brands vs. Twilio Inc |
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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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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