Correlation Between Destination and Cato
Can any of the company-specific risk be diversified away by investing in both Destination 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 Destination and Cato into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Destination XL Group and Cato Corporation, you can compare the effects of market volatilities on Destination 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 Destination with a short position of Cato. Check out your portfolio center. Please also check ongoing floating volatility patterns of Destination and Cato.
Diversification Opportunities for Destination and Cato
0.16 | Correlation Coefficient |
Average diversification
The 3 months correlation between Destination and Cato is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Destination XL Group and Cato Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cato and Destination 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 Destination XL Group 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 Destination i.e., Destination and Cato go up and down completely randomly.
Pair Corralation between Destination and Cato
Given the investment horizon of 90 days Destination XL Group is expected to under-perform the Cato. In addition to that, Destination is 1.08 times more volatile than Cato Corporation. It trades about -0.06 of its total potential returns per unit of risk. Cato Corporation is currently generating about -0.03 per unit of volatility. If you would invest 824.00 in Cato Corporation on August 23, 2024 and sell it today you would lose (328.00) from holding Cato Corporation or give up 39.81% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Destination XL Group vs. Cato Corp.
Performance |
| Timeline |
| Destination XL Group |
| Cato |
Destination and Cato Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Destination and Cato
The main advantage of trading using opposite Destination and Cato positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Destination 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.| Destination vs. Cato Corporation | Destination vs. Zumiez Inc | Destination vs. Tillys Inc | Destination vs. Duluth Holdings |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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