Correlation Between National Retail and Gap
Can any of the company-specific risk be diversified away by investing in both National Retail 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 National Retail and Gap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between National Retail Properties and The Gap, you can compare the effects of market volatilities on National Retail 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 National Retail with a short position of Gap. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Retail and Gap.
Diversification Opportunities for National Retail and Gap
-0.35 | Correlation Coefficient |
Very good diversification
The 3 months correlation between National and Gap is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding National Retail Properties and The Gap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gap and National Retail 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 National Retail Properties 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 has no effect on the direction of National Retail i.e., National Retail and Gap go up and down completely randomly.
Pair Corralation between National Retail and Gap
Assuming the 90 days trading horizon National Retail is expected to generate 20.81 times less return on investment than Gap. But when comparing it to its historical volatility, National Retail Properties is 6.67 times less risky than Gap. It trades about 0.04 of its potential returns per unit of risk. The Gap is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 2,082 in The Gap on September 13, 2024 and sell it today you would earn a total of 293.00 from holding The Gap or generate 14.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
National Retail Properties vs. The Gap
Performance |
| Timeline |
| National Retail Prop |
| Gap |
National Retail and Gap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with National Retail and Gap
The main advantage of trading using opposite National Retail and Gap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Retail 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.| National Retail vs. Apple Inc | National Retail vs. Apple Inc | National Retail vs. Apple Inc | National Retail vs. Apple Inc |
| Gap vs. The TJX Companies | Gap vs. Superior Plus Corp | Gap vs. SIVERS SEMICONDUCTORS AB | Gap vs. NorAm Drilling AS |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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