Correlation Between Aarons and Fossil

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Can any of the company-specific risk be diversified away by investing in both Aarons and Fossil 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 Aarons and Fossil into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The Aarons and Fossil Group, you can compare the effects of market volatilities on Aarons and Fossil 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 Aarons with a short position of Fossil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aarons and Fossil.

Diversification Opportunities for Aarons and Fossil

0.82
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Aarons and Fossil is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding The Aarons and Fossil Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fossil Group and Aarons 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 The Aarons are associated (or correlated) with Fossil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fossil Group has no effect on the direction of Aarons i.e., Aarons and Fossil go up and down completely randomly.

Pair Corralation between Aarons and Fossil

Considering the 90-day investment horizon The Aarons is expected to under-perform the Fossil. But the stock apears to be less risky and, when comparing its historical volatility, The Aarons is 1.75 times less risky than Fossil. The stock trades about -0.18 of its potential returns per unit of risk. The Fossil Group is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  108.00  in Fossil Group on December 29, 2023 and sell it today you would lose (11.00) from holding Fossil Group or give up 10.19% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

The Aarons  vs.  Fossil Group

 Performance 
       Timeline  
Aarons 

Risk-Adjusted Performance

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Low
 
High
Very Weak
Over the last 90 days The Aarons has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.
Fossil Group 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days Fossil 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 basic indicators remain quite persistent which may send shares a bit higher in April 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Aarons and Fossil Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Aarons and Fossil

The main advantage of trading using opposite Aarons and Fossil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aarons position performs unexpectedly, Fossil 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 Fossil will offset losses from the drop in Fossil's long position.
The idea behind The Aarons and Fossil Group 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.

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