Can any of the company-specific risk be diversified away by investing in both Haverty Furniture and Designer 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 Haverty Furniture and Designer Brands into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Haverty Furniture Companies and Designer Brands, you can compare the effects of market volatilities on Haverty Furniture and Designer 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 Haverty Furniture with a short position of Designer Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of Haverty Furniture and Designer Brands.
Diversification Opportunities for Haverty Furniture and Designer Brands
The 3 months correlation between Haverty and Designer is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Haverty Furniture Companies and Designer Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Designer Brands and Haverty Furniture 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 Haverty Furniture Companies are associated (or correlated) with Designer Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Designer Brands has no effect on the direction of Haverty Furniture i.e., Haverty Furniture and Designer Brands go up and down completely randomly.
Pair Corralation between Haverty Furniture and Designer Brands
Considering the 90-day investment horizon Haverty Furniture Companies is expected to under-perform the Designer Brands. But the stock apears to be less risky and, when comparing its historical volatility, Haverty Furniture Companies is 1.47 times less risky than Designer Brands. The stock trades about -0.08 of its potential returns per unit of risk. The Designer Brands is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 1,027 in Designer Brands on March 6, 2024 and sell it today you would earn a total of 78.00 from holding Designer Brands or generate 7.59% return on investment over 90 days.
Over the last 90 days Haverty Furniture Companies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.
Compared to the overall equity markets, risk-adjusted returns on investments in Designer Brands are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly abnormal fundamental drivers, Designer Brands may actually be approaching a critical reversion point that can send shares even higher in July 2024.