Correlation Between Destination and Guess

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

By analyzing existing cross correlation between Destination XL Group and Guess Inc, you can compare the effects of market volatilities on Destination 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 Destination with a short position of Guess. Check out your portfolio center. Please also check ongoing floating volatility patterns of Destination and Guess.

Diversification Opportunities for Destination and Guess

-0.78

Correlation Coefficient

Destination  Guess

Pay attention - limited upside

The 3 months correlation between Destination and Guess is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding Destination XL Group and Guess Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guess Inc and Destination 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 Destination XL Group 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 Destination i.e., Destination and Guess go up and down completely randomly.

Pair Corralation between Destination and Guess

Given the investment horizon of 90 days Destination XL Group is expected to generate 1.12 times more return on investment than Guess. However, Destination is 1.12 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 -0.21 per unit of risk. If you would invest  344.00  in Destination XL Group on February 3, 2024 and sell it today you would lose (14.00) from holding Destination XL Group or give up 4.07% of portfolio value over 90 days.

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

Destination XL Group  vs.  Guess Inc

Destination XL Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Destination XL Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's essential indicators remain nearly stable which may send shares a bit higher in June 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Guess Inc

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Guess Inc are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, Guess unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Destination and Guess

The main advantage of trading using opposite Destination and Guess positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Destination 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 Destination XL Group 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.

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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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.