Correlation Between Carters and Shoe Carnival
Can any of the company-specific risk be diversified away by investing in both Carters and Shoe Carnival 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 Shoe Carnival into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Carters and Shoe Carnival, you can compare the effects of market volatilities on Carters and Shoe Carnival 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 Shoe Carnival. Check out your portfolio center. Please also check ongoing floating volatility patterns of Carters and Shoe Carnival.
Diversification Opportunities for Carters and Shoe Carnival
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Carters and Shoe is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Carters and Shoe Carnival in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shoe Carnival 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 Shoe Carnival. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shoe Carnival has no effect on the direction of Carters i.e., Carters and Shoe Carnival go up and down completely randomly.
Pair Corralation between Carters and Shoe Carnival
Considering the 90-day investment horizon Carters is expected to under-perform the Shoe Carnival. But the stock apears to be less risky and, when comparing its historical volatility, Carters is 1.07 times less risky than Shoe Carnival. The stock trades about -0.1 of its potential returns per unit of risk. The Shoe Carnival is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest 3,795 in Shoe Carnival on September 2, 2024 and sell it today you would lose (419.00) from holding Shoe Carnival or give up 11.04% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Carters vs. Shoe Carnival
Performance |
| Timeline |
| Carters |
| Shoe Carnival |
Carters and Shoe Carnival Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Carters and Shoe Carnival
The main advantage of trading using opposite Carters and Shoe Carnival positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Carters position performs unexpectedly, Shoe Carnival 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 Shoe Carnival will offset losses from the drop in Shoe Carnival's long position.| Carters vs. Childrens Place | Carters vs. Gildan Activewear | Carters vs. Oxford Industries | Carters vs. Columbia Sportswear |
| Shoe Carnival vs. Citi Trends | Shoe Carnival vs. Zumiez Inc | Shoe Carnival vs. Buckle Inc | Shoe Carnival 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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