Correlation Between Cato and Lands End
Can any of the company-specific risk be diversified away by investing in both Cato and Lands End 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 Lands End into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cato Corporation and Lands End, you can compare the effects of market volatilities on Cato and Lands End 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 Lands End. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cato and Lands End.
Diversification Opportunities for Cato and Lands End
Weak diversification
The 3 months correlation between Cato and Lands is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Cato Corp. and Lands End in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lands End 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 Lands End. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lands End has no effect on the direction of Cato i.e., Cato and Lands End go up and down completely randomly.
Pair Corralation between Cato and Lands End
Given the investment horizon of 90 days Cato Corporation is expected to under-perform the Lands End. In addition to that, Cato is 3.55 times more volatile than Lands End. It trades about -0.29 of its total potential returns per unit of risk. Lands End is currently generating about -0.18 per unit of volatility. If you would invest 1,672 in Lands End on August 27, 2024 and sell it today you would lose (139.00) from holding Lands End or give up 8.31% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cato Corp. vs. Lands End
Performance |
| Timeline |
| Cato |
| Lands End |
Cato and Lands End Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cato and Lands End
The main advantage of trading using opposite Cato and Lands End positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cato position performs unexpectedly, Lands End 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 Lands End will offset losses from the drop in Lands End's long position.The idea behind Cato Corporation and Lands End 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.| Lands End vs. Tillys Inc | Lands End vs. Zumiez Inc | Lands End vs. Citi Trends | Lands End 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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