Correlation Between Designer Brands and Cato
Can any of the company-specific risk be diversified away by investing in both Designer Brands and Cato 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 Designer Brands and Cato into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Designer Brands and Cato Corporation, you can compare the effects of market volatilities on Designer Brands and Cato 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 Designer Brands with a short position of Cato. Check out your portfolio center. Please also check ongoing floating volatility patterns of Designer Brands and Cato.
Diversification Opportunities for Designer Brands and Cato
-0.64 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Designer and Cato is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Designer Brands and Cato Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cato and Designer Brands 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 Designer Brands are associated (or correlated) with Cato. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cato has no effect on the direction of Designer Brands i.e., Designer Brands and Cato go up and down completely randomly.
Pair Corralation between Designer Brands and Cato
Considering the 90-day investment horizon Designer Brands is expected to under-perform the Cato. But the stock apears to be less risky and, when comparing its historical volatility, Designer Brands is 2.02 times less risky than Cato. The stock trades about -0.3 of its potential returns per unit of risk. The Cato Corporation is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest 557.00 in Cato Corporation on August 24, 2024 and sell it today you would lose (61.00) from holding Cato Corporation or give up 10.95% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Designer Brands vs. Cato Corp.
Performance |
| Timeline |
| Designer Brands |
| Cato |
Designer Brands and Cato Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Designer Brands and Cato
The main advantage of trading using opposite Designer Brands and Cato positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Designer Brands position performs unexpectedly, Cato 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 Cato will offset losses from the drop in Cato's long position.| Designer Brands vs. Wolverine World Wide | Designer Brands vs. Weyco Group | Designer Brands vs. Steven Madden | Designer Brands vs. Rocky Brands |
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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