Correlation Between Destination and Gap,

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

By analyzing existing cross correlation between Destination XL Group and The Gap,, you can compare the effects of market volatilities on Destination and Gap, 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 Destination with a short position of Gap,. Check out your portfolio center. Please also check ongoing floating volatility patterns of Destination and Gap,.

Diversification Opportunities for Destination and Gap,

-0.5

Correlation Coefficient

Destination  Gap,

Very good diversification

The 3 months correlation between Destination and Gap, is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Destination XL Group and The Gap, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gap, and Destination 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 Destination XL Group are associated (or correlated) with Gap,. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gap, has no effect on the direction of Destination i.e., Destination and Gap, go up and down completely randomly.

Pair Corralation between Destination and Gap,

Given the investment horizon of 90 days Destination XL Group is expected to under-perform the Gap,. In addition to that, Destination is 1.02 times more volatile than The Gap,. It trades about -0.12 of its total potential returns per unit of risk. The Gap, is currently generating about 0.15 per unit of volatility. If you would invest  2,190  in The Gap, on September 13, 2024 and sell it today you would earn a total of  259.00  from holding The Gap, or generate 11.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Destination XL Group  vs.  The Gap,

Destination XL Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Destination XL Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable essential indicators, Destination is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Gap,

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The Gap, are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting basic indicators, Gap, reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Destination and Gap,

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

The idea behind Destination XL Group and The Gap, 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.