Correlation Between Designer Brands and Snap On

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

By analyzing existing cross correlation between Designer Brands and Snap On, you can compare the effects of market volatilities on Designer Brands and Snap On 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 Snap On. Check out your portfolio center. Please also check ongoing floating volatility patterns of Designer Brands and Snap On.

Diversification Opportunities for Designer Brands and Snap On

-0.75

Correlation Coefficient

Designer Brands  Snap On

Pay attention - limited upside

The 3 months correlation between Designer and Snap is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Designer Brands and Snap On in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Snap On 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 Snap On. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Snap On has no effect on the direction of Designer Brands i.e., Designer Brands and Snap On go up and down completely randomly.

Pair Corralation between Designer Brands and Snap On

Considering the 90-day investment horizon Designer Brands is expected to under-perform the Snap On. In addition to that, Designer Brands is 2.87 times more volatile than Snap On. It trades about 0.0 of its total potential returns per unit of risk. Snap On is currently generating about 0.08 per unit of volatility. If you would invest  22,117  in Snap On on September 4, 2024 and sell it today you would earn a total of  14,393  from holding Snap On or generate 65.08% return on investment over 90 days.

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

Designer Brands  vs.  Snap On

Designer Brands

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Designer Brands has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong fundamental drivers, Designer Brands is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Snap On

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Snap On are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, Snap On sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Designer Brands and Snap On

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

The idea behind Designer Brands and Snap On 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.