Correlation Between Zumiez and Guess
Can any of the company-specific risk be diversified away by investing in both Zumiez and Guess 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 Zumiez and Guess into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Zumiez Inc and Guess Inc, you can compare the effects of market volatilities on Zumiez and Guess 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 Zumiez with a short position of Guess. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zumiez and Guess.
Diversification Opportunities for Zumiez and Guess
Poor diversification
The 3 months correlation between Zumiez and Guess is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Zumiez Inc and Guess Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guess Inc and Zumiez 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 Zumiez Inc are associated (or correlated) with Guess. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guess Inc has no effect on the direction of Zumiez i.e., Zumiez and Guess go up and down completely randomly.
Pair Corralation between Zumiez and Guess
Given the investment horizon of 90 days Zumiez Inc is expected to generate 1.71 times more return on investment than Guess. However, Zumiez is 1.71 times more volatile than Guess Inc. It trades about 0.09 of its potential returns per unit of risk. Guess Inc is currently generating about -0.15 per unit of risk. If you would invest 2,178 in Zumiez Inc on August 27, 2024 and sell it today you would earn a total of 104.00 from holding Zumiez Inc or generate 4.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Zumiez Inc vs. Guess Inc
Performance |
| Timeline |
| Zumiez Inc |
| Guess Inc |
Zumiez and Guess Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Zumiez and Guess
The main advantage of trading using opposite Zumiez and Guess positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Zumiez position performs unexpectedly, Guess 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 Guess will offset losses from the drop in Guess' long position.The idea behind Zumiez Inc and Guess Inc 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.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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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