Correlation Between Buckle and L Brands

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

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

Diversification Opportunities for Buckle and L Brands

  Correlation Coefficient
Buckle Inc
L Brands

Very weak diversification

The 3 months correlation between Buckle and L Brands is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Buckle Inc and L Brands in the same portfolio assuming nothing else is changed. The correlation between historical prices or returns on L Brands and Buckle 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 Buckle Inc 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 Buckle i.e., Buckle and L Brands go up and down completely randomly.

Pair Corralation between Buckle and L Brands

Considering the 90-day investment horizon Buckle Inc is expected to under-perform the L Brands. In addition to that, Buckle is 1.09 times more volatile than L Brands. It trades about -0.28 of its total potential returns per unit of risk. L Brands is currently generating about 0.2 per unit of volatility. If you would invest  7,206  in L Brands on May 1, 2021 and sell it today you would earn a total of  742.00  from holding L Brands or generate 10.3% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
ValuesDaily Returns

Buckle Inc  vs.  L Brands

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

Buckle Price Channel

L Brands 
 L Brands Performance
8 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in L Brands are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile fundamental drivers, L Brands sustained solid returns over the last few months and may actually be approaching a breakup point.

L Brands Price Channel

Buckle and L Brands Volatility Contrast

 Predicted Return Density 

Pair Trading with Buckle and L Brands

The main advantage of trading using opposite Buckle and L Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Buckle 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.
The idea behind Buckle Inc 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.
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.

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