Correlation Between G-III Apparel and Sleep Number
Can any of the company-specific risk be diversified away by investing in both G-III Apparel and Sleep Number 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 G-III Apparel and Sleep Number into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between G III Apparel Group and Sleep Number Corp, you can compare the effects of market volatilities on G-III Apparel and Sleep Number 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 G-III Apparel with a short position of Sleep Number. Check out your portfolio center. Please also check ongoing floating volatility patterns of G-III Apparel and Sleep Number.
Diversification Opportunities for G-III Apparel and Sleep Number
0.03 | Correlation Coefficient |
Significant diversification
The 3 months correlation between G-III and Sleep is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding G III Apparel Group and Sleep Number Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sleep Number Corp and G-III Apparel 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 G III Apparel Group are associated (or correlated) with Sleep Number. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sleep Number Corp has no effect on the direction of G-III Apparel i.e., G-III Apparel and Sleep Number go up and down completely randomly.
Pair Corralation between G-III Apparel and Sleep Number
Assuming the 90 days horizon G-III Apparel is expected to generate 1.72 times less return on investment than Sleep Number. But when comparing it to its historical volatility, G III Apparel Group is 1.81 times less risky than Sleep Number. It trades about 0.05 of its potential returns per unit of risk. Sleep Number Corp is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 1,330 in Sleep Number Corp on September 5, 2024 and sell it today you would earn a total of 160.00 from holding Sleep Number Corp or generate 12.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.22% |
| Values | Daily Returns |
G III Apparel Group vs. Sleep Number Corp
Performance |
| Timeline |
| G III Apparel |
| Sleep Number Corp |
G-III Apparel and Sleep Number Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with G-III Apparel and Sleep Number
The main advantage of trading using opposite G-III Apparel and Sleep Number positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if G-III Apparel position performs unexpectedly, Sleep Number 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 Sleep Number will offset losses from the drop in Sleep Number's long position.The idea behind G III Apparel Group and Sleep Number Corp 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.| Sleep Number vs. Scandinavian Tobacco Group | Sleep Number vs. Liberty Broadband | Sleep Number vs. G III Apparel Group | Sleep Number vs. IMPERIAL TOBACCO |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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