Correlation Between Designer Brands and PetMed Express

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

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

Diversification Opportunities for Designer Brands and PetMed Express

-0.68

Correlation Coefficient

Designer Brands  PetMed Express

Excellent diversification

The 3 months correlation between Designer and PetMed is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Designer Brands and PetMed Express in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PetMed Express and Designer 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 Designer Brands are associated (or correlated) with PetMed Express. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PetMed Express has no effect on the direction of Designer Brands i.e., Designer Brands and PetMed Express go up and down completely randomly.

Pair Corralation between Designer Brands and PetMed Express

Considering the 90-day investment horizon Designer Brands is expected to under-perform the PetMed Express. But the stock apears to be less risky and, when comparing its historical volatility, Designer Brands is 3.17 times less risky than PetMed Express. The stock trades about -0.25 of its potential returns per unit of risk. The PetMed Express is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  398.00  in PetMed Express on August 10, 2024 and sell it today you would earn a total of  158.00  from holding PetMed Express or generate 39.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.65%
Values	Daily Returns

Designer Brands  vs.  PetMed Express

Designer Brands

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Designer Brands has generated negative risk-adjusted returns adding no value to investors with long positions. Despite abnormal performance in the last few months, the Stock's fundamental drivers remain fairly strong which may send shares a bit higher in December 2024. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

PetMed Express

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in PetMed Express are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, PetMed Express unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Designer Brands and PetMed Express

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

The idea behind Designer Brands and PetMed Express 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.