Correlation Between Destination and Abercrombie Fitch

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

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

Diversification Opportunities for Destination and Abercrombie Fitch

-0.8
  Correlation Coefficient
Destination XL Group
Abercrombie Fitch

Pay attention - limited upside

The 3 months correlation between Destination and Abercrombie is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Destination XL Group and Abercrombie Fitch in the same portfolio assuming nothing else is changed. The correlation between historical prices or returns on Abercrombie Fitch 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 Abercrombie Fitch. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Abercrombie Fitch has no effect on the direction of Destination i.e., Destination and Abercrombie Fitch go up and down completely randomly.

Pair Corralation between Destination and Abercrombie Fitch

Given the investment horizon of 90 days Destination XL Group is expected to generate 2.1 times more return on investment than Abercrombie Fitch. However, Destination is 2.1 times more volatile than Abercrombie Fitch. It trades about 0.07 of its potential returns per unit of risk. Abercrombie Fitch is currently generating about 0.07 per unit of risk. If you would invest  158.00  in Destination XL Group on June 23, 2021 and sell it today you would earn a total of  470.00  from holding Destination XL Group or generate 297.47% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Destination XL Group  vs.  Abercrombie Fitch

 Performance (%) 
      Timeline 
Destination XL Group 
 Destination Performance
17 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Destination XL Group are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile essential indicators, Destination exhibited solid returns over the last few months and may actually be approaching a breakup point.

Destination Price Channel

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 latest fragile performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Abercrombie Price Channel

Destination and Abercrombie Fitch Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with Destination and Abercrombie Fitch

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

Destination XL Group

Pair trading matchups for Destination

The idea behind Destination XL Group and Abercrombie Fitch 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.

Abercrombie Fitch

Pair trading matchups for Abercrombie Fitch

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.

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