Correlation Between Gap, and Fossil
Can any of the company-specific risk be diversified away by investing in both Gap, and Fossil 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 Gap, and Fossil into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The Gap, and Fossil Group, you can compare the effects of market volatilities on Gap, and Fossil 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 Gap, with a short position of Fossil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gap, and Fossil.
Diversification Opportunities for Gap, and Fossil
Very weak diversification
The 3 months correlation between Gap, and Fossil is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding The Gap, and Fossil Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fossil Group and Gap, 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 The Gap, are associated (or correlated) with Fossil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fossil Group has no effect on the direction of Gap, i.e., Gap, and Fossil go up and down completely randomly.
Pair Corralation between Gap, and Fossil
Considering the 90-day investment horizon The Gap, is expected to under-perform the Fossil. But the stock apears to be less risky and, when comparing its historical volatility, The Gap, is 1.66 times less risky than Fossil. The stock trades about -0.03 of its potential returns per unit of risk. The Fossil Group is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 124.00 in Fossil Group on August 30, 2024 and sell it today you would earn a total of 25.00 from holding Fossil Group or generate 20.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Gap, vs. Fossil Group
Performance |
| Timeline |
| Gap, |
| Fossil Group |
Gap, and Fossil Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gap, and Fossil
The main advantage of trading using opposite Gap, and Fossil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gap, position performs unexpectedly, Fossil 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 Fossil will offset losses from the drop in Fossil's long position.The idea behind The Gap, and Fossil Group 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.| Fossil vs. VF Corporation | Fossil vs. Levi Strauss Co | Fossil vs. Under Armour A | Fossil vs. Columbia Sportswear |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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