Correlation Between VMware and Designer Brands

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

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

Diversification Opportunities for VMware and Designer Brands

0.05

Correlation Coefficient

VMware  Designer Brands

Significant diversification

The 3 months correlation between VMware and Designer is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding VMware Inc and Designer Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Designer Brands and VMware 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 VMware Inc 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 VMware i.e., VMware and Designer Brands go up and down completely randomly.

Pair Corralation between VMware and Designer Brands

If you would invest  14,248  in VMware Inc on January 25, 2024 and sell it today you would earn a total of  0.00  from holding VMware Inc or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	4.55%
Values	Daily Returns

VMware Inc  vs.  Designer Brands

VMware Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VMware Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable primary indicators, VMware is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Designer Brands

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Designer Brands are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite fairly abnormal fundamental drivers, Designer Brands demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with VMware and Designer Brands

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

The idea behind VMware Inc and Designer 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.

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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 the ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.