Correlation Between Designer Brands and Dr Martens
Can any of the company-specific risk be diversified away by investing in both Designer Brands and Dr Martens 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 Dr Martens into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Designer Brands and Dr Martens plc, you can compare the effects of market volatilities on Designer Brands and Dr Martens 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 Dr Martens. Check out your portfolio center. Please also check ongoing floating volatility patterns of Designer Brands and Dr Martens.
Diversification Opportunities for Designer Brands and Dr Martens
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Designer and DOCMF is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Designer Brands and Dr Martens plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dr Martens plc 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 Dr Martens. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dr Martens plc has no effect on the direction of Designer Brands i.e., Designer Brands and Dr Martens go up and down completely randomly.
Pair Corralation between Designer Brands and Dr Martens
Considering the 90-day investment horizon Designer Brands is expected to under-perform the Dr Martens. In addition to that, Designer Brands is 1.38 times more volatile than Dr Martens plc. It trades about -0.19 of its total potential returns per unit of risk. Dr Martens plc is currently generating about -0.02 per unit of volatility. If you would invest 73.00 in Dr Martens plc on August 25, 2024 and sell it today you would lose (1.00) from holding Dr Martens plc or give up 1.37% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Designer Brands vs. Dr Martens plc
Performance |
Timeline |
Designer Brands |
Dr Martens plc |
Designer Brands and Dr Martens Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Designer Brands and Dr Martens
The main advantage of trading using opposite Designer Brands and Dr Martens positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Designer Brands position performs unexpectedly, Dr Martens 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 Dr Martens will offset losses from the drop in Dr Martens' long position.Designer Brands vs. Wolverine World Wide | Designer Brands vs. Weyco Group | Designer Brands vs. Steven Madden | Designer Brands vs. Rocky Brands |
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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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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