Correlation Between Floor Decor and Designer Brands
Can any of the company-specific risk be diversified away by investing in both Floor Decor 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 Floor Decor and Designer Brands into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Floor Decor Holdings and Designer Brands, you can compare the effects of market volatilities on Floor Decor 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 Floor Decor with a short position of Designer Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of Floor Decor and Designer Brands.
Diversification Opportunities for Floor Decor and Designer Brands
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Floor and Designer is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Floor Decor Holdings and Designer Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Designer Brands and Floor Decor 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 Floor Decor Holdings 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 Floor Decor i.e., Floor Decor and Designer Brands go up and down completely randomly.
Pair Corralation between Floor Decor and Designer Brands
Considering the 90-day investment horizon Floor Decor Holdings is expected to generate 1.05 times more return on investment than Designer Brands. However, Floor Decor is 1.05 times more volatile than Designer Brands. It trades about 0.17 of its potential returns per unit of risk. Designer Brands is currently generating about -0.16 per unit of risk. If you would invest 10,202 in Floor Decor Holdings on August 26, 2024 and sell it today you would earn a total of 998.00 from holding Floor Decor Holdings or generate 9.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Floor Decor Holdings vs. Designer Brands
Performance |
| Timeline |
| Floor Decor Holdings |
| Designer Brands |
Floor Decor and Designer Brands Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Floor Decor and Designer Brands
The main advantage of trading using opposite Floor Decor and Designer Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Floor Decor 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.| Floor Decor vs. Arhaus Inc | Floor Decor vs. Haverty Furniture Companies | Floor Decor vs. Kirklands | Floor Decor vs. Haverty Furniture Companies |
| Designer Brands vs. Wolverine World Wide | Designer Brands vs. Weyco Group | Designer Brands vs. Steven Madden | Designer Brands vs. Rocky Brands |
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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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