Correlation Between Cato and Aquagold International
Can any of the company-specific risk be diversified away by investing in both Cato and Aquagold International 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 Cato and Aquagold International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cato Corporation and Aquagold International, you can compare the effects of market volatilities on Cato and Aquagold International 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 Cato with a short position of Aquagold International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cato and Aquagold International.
Diversification Opportunities for Cato and Aquagold International
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Cato and Aquagold is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Cato Corp. and Aquagold International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aquagold International and Cato 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 Cato Corporation are associated (or correlated) with Aquagold International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aquagold International has no effect on the direction of Cato i.e., Cato and Aquagold International go up and down completely randomly.
Pair Corralation between Cato and Aquagold International
Given the investment horizon of 90 days Cato Corporation is expected to under-perform the Aquagold International. But the stock apears to be less risky and, when comparing its historical volatility, Cato Corporation is 18.37 times less risky than Aquagold International. The stock trades about -0.04 of its potential returns per unit of risk. The Aquagold International is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 25.00 in Aquagold International on August 25, 2024 and sell it today you would lose (24.40) from holding Aquagold International or give up 97.6% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cato Corp. vs. Aquagold International
Performance |
| Timeline |
| Cato |
| Aquagold International |
Cato and Aquagold International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cato and Aquagold International
The main advantage of trading using opposite Cato and Aquagold International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cato position performs unexpectedly, Aquagold International 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 Aquagold International will offset losses from the drop in Aquagold International's long position.The idea behind Cato Corporation and Aquagold International 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.| Aquagold International vs. PepsiCo | Aquagold International vs. Coca Cola Consolidated | Aquagold International vs. Monster Beverage Corp | Aquagold International vs. Celsius Holdings |
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 the Global Correlations module to find global opportunities by holding instruments from different markets.
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