Correlation Between Signet Jewelers and Lands End

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

Diversification Opportunities for Signet Jewelers and Lands End

0.08
  Correlation Coefficient

Significant diversification

The 24 months correlation between Signet and Lands is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Signet Jewelers and Lands End in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lands End and Signet Jewelers 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 Signet Jewelers are associated (or correlated) with Lands End. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lands End has no effect on the direction of Signet Jewelers i.e., Signet Jewelers and Lands End go up and down completely randomly.

Pair Corralation between Signet Jewelers and Lands End

Considering the 90-day investment horizon Signet Jewelers is expected to generate 0.84 times more return on investment than Lands End. However, Signet Jewelers is 1.19 times less risky than Lands End. It trades about 0.06 of its potential returns per unit of risk. Lands End is currently generating about -0.01 per unit of risk. If you would invest  2,636  in Signet Jewelers on September 7, 2022 and sell it today you would earn a total of  3,147  from holding Signet Jewelers or generate 119.39% return on investment over 90 days.
Time Period24 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy99.8%
ValuesDaily Returns

Signet Jewelers  vs.  Lands End

 Performance (%) 
       Timeline  
Signet Jewelers 
Signet Performance
4 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Signet Jewelers are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady forward indicators, Signet Jewelers exhibited solid returns over the last few months and may actually be approaching a breakup point.

Signet Price Channel

Lands End 
Lands Performance
0 of 100
Over the last 90 days Lands End has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Lands End is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Lands Price Channel

Signet Jewelers and Lands End Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Signet Jewelers and Lands End

The main advantage of trading using opposite Signet Jewelers and Lands End positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Signet Jewelers position performs unexpectedly, Lands End 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 Lands End will offset losses from the drop in Lands End's long position.
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The idea behind Signet Jewelers and Lands End 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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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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.

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