Correlation Between L Brands and Buckle

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

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

Diversification Opportunities for L Brands and Buckle

0.4
  Correlation Coefficient
L Brands
Buckle Inc

Very weak diversification

The 3 months correlation between L Brands and Buckle is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding L Brands and Buckle Inc in the same portfolio assuming nothing else is changed. The correlation between historical prices or returns on Buckle Inc and L Brands 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 L Brands are associated (or correlated) with Buckle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Buckle Inc has no effect on the direction of L Brands i.e., L Brands and Buckle go up and down completely randomly.

Pair Corralation between L Brands and Buckle

Allowing for the 90-day total investment horizon L Brands is expected to generate 0.97 times more return on investment than Buckle. However, L Brands is 1.03 times less risky than Buckle. It trades about 0.16 of its potential returns per unit of risk. Buckle Inc is currently generating about 0.12 per unit of risk. If you would invest  2,892  in L Brands on May 5, 2021 and sell it today you would earn a total of  5,100  from holding L Brands or generate 176.35% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

L Brands  vs.  Buckle Inc

 Performance (%) 
      Timeline 
L Brands 
 L Brands Performance
10 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in L Brands are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady 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 Inc 
 Buckle Performance
1 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Buckle Inc are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound forward-looking signals, Buckle is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Buckle Price Channel

L Brands and Buckle Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with L Brands and Buckle

The main advantage of trading using opposite L Brands and Buckle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if L Brands position performs unexpectedly, Buckle 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 Buckle will offset losses from the drop in Buckle's long position.
The idea behind L Brands and Buckle Inc 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 Bond Directory module to find actively traded corporate debentures issued by US companies.

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