Correlation Between Destination and Shoe Carnival
Can any of the company-specific risk be diversified away by investing in both Destination 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 Destination and Shoe Carnival 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 Shoe Carnival, you can compare the effects of market volatilities on Destination 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 Destination with a short position of Shoe Carnival. Check out your portfolio center. Please also check ongoing floating volatility patterns of Destination and Shoe Carnival.
Diversification Opportunities for Destination and Shoe Carnival
0.01 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Destination and Shoe is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Destination XL Group and Shoe Carnival in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shoe Carnival 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 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 Destination i.e., Destination and Shoe Carnival go up and down completely randomly.
Pair Corralation between Destination and Shoe Carnival
Given the investment horizon of 90 days Destination XL Group is expected to generate 1.39 times more return on investment than Shoe Carnival. However, Destination is 1.39 times more volatile than Shoe Carnival. It trades about -0.13 of its potential returns per unit of risk. Shoe Carnival is currently generating about -0.38 per unit of risk. If you would invest 276.00 in Destination XL Group on November 18, 2024 and sell it today you would lose (27.00) from holding Destination XL Group or give up 9.78% 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. Shoe Carnival
Performance |
| Timeline |
| Destination XL Group |
| Shoe Carnival |
Destination and Shoe Carnival Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Destination and Shoe Carnival
The main advantage of trading using opposite Destination and Shoe Carnival positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Destination 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.| Destination vs. Cato Corporation | Destination vs. Zumiez Inc | Destination vs. Tillys Inc | Destination vs. Duluth Holdings |
| 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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