Correlation Between Cato and Duluth Holdings
Can any of the company-specific risk be diversified away by investing in both Cato and Duluth 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 Duluth 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 Duluth Holdings, you can compare the effects of market volatilities on Cato and Duluth 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 Duluth Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cato and Duluth Holdings.
Diversification Opportunities for Cato and Duluth Holdings
0.53 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Cato and Duluth is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Cato Corp. and Duluth Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Duluth 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 Duluth Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Duluth Holdings has no effect on the direction of Cato i.e., Cato and Duluth Holdings go up and down completely randomly.
Pair Corralation between Cato and Duluth Holdings
Given the investment horizon of 90 days Cato Corporation is expected to generate 1.3 times more return on investment than Duluth Holdings. However, Cato is 1.3 times more volatile than Duluth Holdings. It trades about -0.04 of its potential returns per unit of risk. Duluth Holdings is currently generating about -0.05 per unit of risk. If you would invest 636.00 in Cato Corporation on October 20, 2024 and sell it today you would lose (258.00) from holding Cato Corporation or give up 40.57% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cato Corp. vs. Duluth Holdings
Performance |
| Timeline |
| Cato |
| Duluth Holdings |
Cato and Duluth Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cato and Duluth Holdings
The main advantage of trading using opposite Cato and Duluth Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cato position performs unexpectedly, Duluth 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 Duluth Holdings will offset losses from the drop in Duluth Holdings' long position.The idea behind Cato Corporation and Duluth 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.| Duluth Holdings vs. Zumiez Inc | Duluth Holdings vs. JJill Inc | Duluth Holdings vs. Shoe Carnival | Duluth Holdings vs. Cato Corporation |
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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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