Correlation Between Foot Locker and Digital Brands
Can any of the company-specific risk be diversified away by investing in both Foot Locker and Digital 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 Foot Locker and Digital Brands into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Foot Locker and Digital Brands Group, you can compare the effects of market volatilities on Foot Locker and Digital 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 Foot Locker with a short position of Digital Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of Foot Locker and Digital Brands.
Diversification Opportunities for Foot Locker and Digital Brands
-0.1 | Correlation Coefficient |
Good diversification
The 3 months correlation between Foot and Digital is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Foot Locker and Digital Brands Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Digital Brands Group and Foot Locker 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 Foot Locker are associated (or correlated) with Digital Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Digital Brands Group has no effect on the direction of Foot Locker i.e., Foot Locker and Digital Brands go up and down completely randomly.
Pair Corralation between Foot Locker and Digital Brands
Allowing for the 90-day total investment horizon Foot Locker is expected to generate 310.76 times less return on investment than Digital Brands. But when comparing it to its historical volatility, Foot Locker is 41.69 times less risky than Digital Brands. It trades about 0.02 of its potential returns per unit of risk. Digital Brands Group is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 596.00 in Digital Brands Group on September 1, 2024 and sell it today you would earn a total of 1,064 from holding Digital Brands Group or generate 178.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 63.17% |
| Values | Daily Returns |
Foot Locker vs. Digital Brands Group
Performance |
| Timeline |
| Foot Locker |
| Digital Brands Group |
Foot Locker and Digital Brands Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Foot Locker and Digital Brands
The main advantage of trading using opposite Foot Locker and Digital Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Foot Locker position performs unexpectedly, Digital 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 Digital Brands will offset losses from the drop in Digital Brands' long position.| Foot Locker vs. Abercrombie Fitch | Foot Locker vs. Urban Outfitters | Foot Locker vs. Childrens Place | Foot Locker vs. American Eagle Outfitters |
| Digital Brands vs. Digital Brands Group | Digital Brands vs. Data Storage | Digital Brands vs. DatChat Series A |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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