Correlation Between Cato and Gap
Can any of the company-specific risk be diversified away by investing in both Cato and Gap 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 Gap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cato Corporation and Gap Inc, you can compare the effects of market volatilities on Cato and Gap 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 Gap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cato and Gap.
Diversification Opportunities for Cato and Gap
Very good diversification
The 3 months correlation between Cato and Gap is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Cato Corp. and Gap Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gap Inc 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 Gap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gap Inc has no effect on the direction of Cato i.e., Cato and Gap go up and down completely randomly.
Pair Corralation between Cato and Gap
If you would invest 2,328 in Gap Inc on August 30, 2024 and sell it today you would earn a total of 0.00 from holding Gap Inc or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 4.35% |
| Values | Daily Returns |
Cato Corp. vs. Gap Inc
Performance |
| Timeline |
| Cato |
| Gap Inc |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Cato and Gap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cato and Gap
The main advantage of trading using opposite Cato and Gap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cato position performs unexpectedly, Gap 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 Gap will offset losses from the drop in Gap's long position.The idea behind Cato Corporation and Gap Inc 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.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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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