Correlation Between Carters and Peloton Interactive
Can any of the company-specific risk be diversified away by investing in both Carters and Peloton Interactive 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 Carters and Peloton Interactive into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Carters and Peloton Interactive, you can compare the effects of market volatilities on Carters and Peloton Interactive 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 Carters with a short position of Peloton Interactive. Check out your portfolio center. Please also check ongoing floating volatility patterns of Carters and Peloton Interactive.
Diversification Opportunities for Carters and Peloton Interactive
0.58 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Carters and Peloton is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Carters and Peloton Interactive in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Peloton Interactive and Carters 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 Carters are associated (or correlated) with Peloton Interactive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Peloton Interactive has no effect on the direction of Carters i.e., Carters and Peloton Interactive go up and down completely randomly.
Pair Corralation between Carters and Peloton Interactive
Considering the 90-day investment horizon Carters is expected to under-perform the Peloton Interactive. But the stock apears to be less risky and, when comparing its historical volatility, Carters is 2.47 times less risky than Peloton Interactive. The stock trades about -0.03 of its potential returns per unit of risk. The Peloton Interactive is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 827.00 in Peloton Interactive on November 18, 2024 and sell it today you would earn a total of 150.00 from holding Peloton Interactive or generate 18.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Carters vs. Peloton Interactive
Performance |
| Timeline |
| Carters |
| Peloton Interactive |
Carters and Peloton Interactive Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Carters and Peloton Interactive
The main advantage of trading using opposite Carters and Peloton Interactive positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Carters position performs unexpectedly, Peloton Interactive 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 Peloton Interactive will offset losses from the drop in Peloton Interactive's long position.| Carters vs. Childrens Place | Carters vs. Gildan Activewear | Carters vs. Oxford Industries | Carters vs. Columbia Sportswear |
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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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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