Correlation Between L Brands and Guess

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

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

Diversification Opportunities for L Brands and Guess

0.0

Correlation Coefficient

L Brands  Guess

Pay attention - limited upside

The 3 months correlation between L Brands and Guess is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding L Brands and Guess Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guess Inc and L Brands 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 L Brands 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 L Brands i.e., L Brands and Guess go up and down completely randomly.

Pair Corralation between L Brands and Guess

If you would invest  1,530  in Guess Inc on February 16, 2024 and sell it today you would earn a total of  1,110  from holding Guess Inc or generate 72.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

L Brands  vs.  Guess Inc

L Brands

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days L Brands has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental drivers, L Brands is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Guess Inc

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Guess Inc are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating technical and fundamental indicators, Guess unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with L Brands and Guess

The main advantage of trading using opposite L Brands and Guess positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if L Brands 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 L Brands 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.