Correlation Between Abercrombie Fitch and L Brands

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

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

Diversification Opportunities for Abercrombie Fitch and L Brands

0.0
  Correlation Coefficient
Abercrombie Fitch
L Brands

Pay attention - limited upside

The 3 months correlation between Abercrombie and L Brands is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Abercrombie Fitch and L Brands in the same portfolio assuming nothing else is changed. The correlation between historical prices or returns on L Brands and Abercrombie Fitch 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 Abercrombie Fitch are associated (or correlated) with L Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of L Brands has no effect on the direction of Abercrombie Fitch i.e., Abercrombie Fitch and L Brands go up and down completely randomly.

Pair Corralation between Abercrombie Fitch and L Brands

If you would invest  8,007  in L Brands on May 1, 2021 and sell it today you would earn a total of  0.00  from holding L Brands or generate 0.0% return on investment over 90 days.
Time Period3 Months [change]
DirectionFlat 
StrengthInsignificant
Accuracy4.55%
ValuesDaily Returns

Abercrombie Fitch  vs.  L Brands

 Performance (%) 
      Timeline 
Abercrombie Fitch 
 Abercrombie Performance
0 of 100
Over the last 90 days Abercrombie Fitch has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Abercrombie Fitch is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Abercrombie Price Channel

L Brands 
 L Brands Performance
0 of 100
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.

Abercrombie Fitch and L Brands Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with Abercrombie Fitch and L Brands

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

Abercrombie Fitch

Pair trading matchups for Abercrombie Fitch

The idea behind Abercrombie Fitch and L Brands 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.

L Brands

Pair trading matchups for L Brands

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The effect of pair diversification on risk is to reduce it, but we should note this doesn't apply to all risk types. When we trade pairs against L Brands as a counterpart, there is always some inherent risk that will never be diversified away no matter what. This volatility limits the effect of tactical diversification using pair trading. L Brands' systematic risk is the inherent uncertainty of the entire market, and therefore cannot be mitigated even by pair-trading it against the equity that is not highly correlated to it. On the other hand, L Brands' unsystematic risk describes the types of risk that we can protect against, at least to some degree, by selecting a matching pair that is not perfectly correlated to L Brands.
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 Price Transformation module to use Price Transformation models to analyze depth of different equity instruments across global markets.

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