Correlation Between Duluth Holdings and Abercrombie Fitch

Can any of the company-specific risk be diversified away by investing in both Duluth Holdings and Abercrombie Fitch 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 Duluth Holdings and Abercrombie Fitch into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Duluth Holdings and Abercrombie Fitch, you can compare the effects of market volatilities on Duluth Holdings and Abercrombie Fitch 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 Duluth Holdings with a short position of Abercrombie Fitch. Check out your portfolio center. Please also check ongoing floating volatility patterns of Duluth Holdings and Abercrombie Fitch.

Diversification Opportunities for Duluth Holdings and Abercrombie Fitch

-0.03

Correlation Coefficient

Duluth Holdings  Abercrombie Fitch

Good diversification

The 3 months correlation between Duluth and Abercrombie is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Duluth Holdings and Abercrombie Fitch in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Abercrombie Fitch and Duluth Holdings 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 Duluth Holdings are associated (or correlated) with Abercrombie Fitch. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Abercrombie Fitch has no effect on the direction of Duluth Holdings i.e., Duluth Holdings and Abercrombie Fitch go up and down completely randomly.

Pair Corralation between Duluth Holdings and Abercrombie Fitch

Given the investment horizon of 90 days Duluth Holdings is expected to under-perform the Abercrombie Fitch. But the stock apears to be less risky and, when comparing its historical volatility, Duluth Holdings is 1.47 times less risky than Abercrombie Fitch. The stock trades about -0.32 of its potential returns per unit of risk. The Abercrombie Fitch is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  11,942  in Abercrombie Fitch on February 7, 2024 and sell it today you would earn a total of  974.00  from holding Abercrombie Fitch or generate 8.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Duluth Holdings  vs.  Abercrombie Fitch

Duluth Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Duluth Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Abercrombie Fitch

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Abercrombie Fitch are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Abercrombie Fitch reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Duluth Holdings and Abercrombie Fitch

The main advantage of trading using opposite Duluth Holdings and Abercrombie Fitch positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Duluth Holdings position performs unexpectedly, Abercrombie Fitch 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 Abercrombie Fitch will offset losses from the drop in Abercrombie Fitch's long position.

The idea behind Duluth Holdings and Abercrombie Fitch 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.

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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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.