Correlation Between Cato and Torrid Holdings
Can any of the company-specific risk be diversified away by investing in both Cato and Torrid Holdings 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 Torrid Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cato Corporation and Torrid Holdings, you can compare the effects of market volatilities on Cato and Torrid Holdings 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 Torrid Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cato and Torrid Holdings.
Diversification Opportunities for Cato and Torrid Holdings
-0.13 | Correlation Coefficient |
Good diversification
The 3 months correlation between Cato and Torrid is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Cato Corp. and Torrid Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Torrid Holdings 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 Torrid Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Torrid Holdings has no effect on the direction of Cato i.e., Cato and Torrid Holdings go up and down completely randomly.
Pair Corralation between Cato and Torrid Holdings
Given the investment horizon of 90 days Cato Corporation is expected to under-perform the Torrid Holdings. In addition to that, Cato is 1.01 times more volatile than Torrid Holdings. It trades about -0.21 of its total potential returns per unit of risk. Torrid Holdings is currently generating about 0.5 per unit of volatility. If you would invest 528.00 in Torrid Holdings on November 3, 2024 and sell it today you would earn a total of 143.00 from holding Torrid Holdings or generate 27.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.24% |
| Values | Daily Returns |
Cato Corp. vs. Torrid Holdings
Performance |
| Timeline |
| Cato |
| Torrid Holdings |
Cato and Torrid Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cato and Torrid Holdings
The main advantage of trading using opposite Cato and Torrid Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cato position performs unexpectedly, Torrid Holdings 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 Torrid Holdings will offset losses from the drop in Torrid Holdings' long position.The idea behind Cato Corporation and Torrid Holdings 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.| Torrid Holdings vs. Cato Corporation | Torrid Holdings vs. Shoe Carnival | Torrid Holdings vs. Genesco | Torrid Holdings vs. Zumiez Inc |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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