Correlation Between Designer Brands and Adidas AG

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

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

Diversification Opportunities for Designer Brands and Adidas AG

0.8

Correlation Coefficient

Designer Brands  Adidas AG

Very poor diversification

The 3 months correlation between Designer and Adidas is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Designer Brands and Adidas AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adidas AG 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 Adidas AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Adidas AG has no effect on the direction of Designer Brands i.e., Designer Brands and Adidas AG go up and down completely randomly.

Pair Corralation between Designer Brands and Adidas AG

Considering the 90-day investment horizon Designer Brands is expected to generate 1.32 times more return on investment than Adidas AG. However, Designer Brands is 1.32 times more volatile than Adidas AG. It trades about 0.4 of its potential returns per unit of risk. Adidas AG is currently generating about 0.16 per unit of risk. If you would invest  262.00  in Designer Brands on February 17, 2025 and sell it today you would earn a total of  104.00  from holding Designer Brands or generate 39.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Designer Brands  vs.  Adidas AG

Designer Brands

Risk-Adjusted Performance

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 June 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Adidas AG

Risk-Adjusted Performance

Very Weak

Over the last 90 days Adidas AG has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Designer Brands and Adidas AG

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

The idea behind Designer Brands and Adidas AG 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.