Correlation Between Guess and Industria
Can any of the company-specific risk be diversified away by investing in both Guess and Industria 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 Guess and Industria into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Guess Inc and Industria de Diseo, you can compare the effects of market volatilities on Guess and Industria 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 Guess with a short position of Industria. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guess and Industria.
Diversification Opportunities for Guess and Industria
Poor diversification
The 3 months correlation between Guess and Industria is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Guess Inc and Industria de Diseo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Industria de Diseo and Guess 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 Guess Inc are associated (or correlated) with Industria. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Industria de Diseo has no effect on the direction of Guess i.e., Guess and Industria go up and down completely randomly.
Pair Corralation between Guess and Industria
Considering the 90-day investment horizon Guess Inc is expected to under-perform the Industria. But the stock apears to be less risky and, when comparing its historical volatility, Guess Inc is 1.36 times less risky than Industria. The stock trades about -0.27 of its potential returns per unit of risk. The Industria de Diseo is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest 5,282 in Industria de Diseo on October 22, 2024 and sell it today you would lose (115.00) from holding Industria de Diseo or give up 2.18% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 94.74% |
| Values | Daily Returns |
Guess Inc vs. Industria de Diseo
Performance |
| Timeline |
| Guess Inc |
| Industria de Diseo |
Guess and Industria Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Guess and Industria
The main advantage of trading using opposite Guess and Industria positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Guess position performs unexpectedly, Industria 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 Industria will offset losses from the drop in Industria's long position.The idea behind Guess Inc and Industria de Diseo 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.| Industria vs. Fast Retailing Co | Industria vs. The TJX Companies | Industria vs. Ross Stores | Industria vs. Urban Outfitters |
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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