Correlation Between Snap On and Designer Brands

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

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

Diversification Opportunities for Snap On and Designer Brands

-0.68

Correlation Coefficient

Snap On  Designer Brands

Excellent diversification

The 3 months correlation between Snap and Designer is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Snap On and Designer Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Designer Brands and Snap On 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 Snap On are associated (or correlated) with Designer Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Designer Brands has no effect on the direction of Snap On i.e., Snap On and Designer Brands go up and down completely randomly.

Pair Corralation between Snap On and Designer Brands

Considering the 90-day investment horizon Snap On is expected to generate 0.37 times more return on investment than Designer Brands. However, Snap On is 2.7 times less risky than Designer Brands. It trades about 0.25 of its potential returns per unit of risk. Designer Brands is currently generating about 0.08 per unit of risk. If you would invest  27,620  in Snap On on September 12, 2024 and sell it today you would earn a total of  8,019  from holding Snap On or generate 29.03% return on investment over 90 days.

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

Snap On  vs.  Designer Brands

Snap On

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Snap On are ranked lower than 19 (%) 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.

Designer Brands

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Designer Brands are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly abnormal fundamental drivers, Designer Brands demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Snap On and Designer Brands

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

The idea behind Snap On and Designer 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.