Correlation Between Destination and Carters

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Can any of the company-specific risk be diversified away by investing in both Destination and Carters 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 Carters into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Destination XL Group and Carters, you can compare the effects of market volatilities on Destination and Carters 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 Carters. Check out your portfolio center. Please also check ongoing floating volatility patterns of Destination and Carters.

Diversification Opportunities for Destination and Carters

0.82
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Destination and Carters is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Destination XL Group and Carters in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carters 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 Carters. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carters has no effect on the direction of Destination i.e., Destination and Carters go up and down completely randomly.

Pair Corralation between Destination and Carters

Given the investment horizon of 90 days Destination XL Group is expected to under-perform the Carters. In addition to that, Destination is 1.98 times more volatile than Carters. It trades about -0.09 of its total potential returns per unit of risk. Carters is currently generating about -0.1 per unit of volatility. If you would invest  8,501  in Carters on March 28, 2022 and sell it today you would lose (1,028)  from holding Carters or give up 12.09% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Destination XL Group  vs.  Carters

 Performance (%) 
      Timeline 
Destination XL Group 
Destination Performance
0 of 100
Over the last 90 days Destination XL Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's essential indicators remain rather sound which may send shares a bit higher in July 2022. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Structure and Payout Changes

Last Split Factor
3:2
Last Split Date
1993-06-23

Destination Price Channel

Carters 
Carters Performance
0 of 100
Over the last 90 days Carters has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in July 2022. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Structure and Payout Changes

Forward Annual Dividend Yield
0.0424
Payout Ratio
0.33
Last Split Factor
2:1
Forward Annual Dividend Rate
3.0
Dividend Date
2022-06-10
Ex Dividend Date
2022-05-27
Last Split Date
2006-06-07

Carters Price Channel

Destination and Carters Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with Destination and Carters

The main advantage of trading using opposite Destination and Carters positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Destination position performs unexpectedly, Carters 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 Carters will offset losses from the drop in Carters' long position.
The idea behind Destination XL Group and Carters 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.

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