Correlation Between Foot Locker and Continental
Can any of the company-specific risk be diversified away by investing in both Foot Locker and Continental 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 Foot Locker and Continental into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Foot Locker and Caleres, you can compare the effects of market volatilities on Foot Locker and Continental 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 Foot Locker with a short position of Continental. Check out your portfolio center. Please also check ongoing floating volatility patterns of Foot Locker and Continental.
Diversification Opportunities for Foot Locker and Continental
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Foot and Continental is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Foot Locker and Caleres in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Continental and Foot Locker 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 Foot Locker are associated (or correlated) with Continental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Continental has no effect on the direction of Foot Locker i.e., Foot Locker and Continental go up and down completely randomly.
Pair Corralation between Foot Locker and Continental
Allowing for the 90-day total investment horizon Foot Locker is expected to generate 1.96 times less return on investment than Continental. In addition to that, Foot Locker is 1.03 times more volatile than Caleres. It trades about 0.07 of its total potential returns per unit of risk. Caleres is currently generating about 0.15 per unit of volatility. If you would invest 3,069 in Caleres on August 27, 2024 and sell it today you would earn a total of 211.00 from holding Caleres or generate 6.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Foot Locker vs. Caleres
Performance |
| Timeline |
| Foot Locker |
| Continental |
Foot Locker and Continental Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Foot Locker and Continental
The main advantage of trading using opposite Foot Locker and Continental positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Foot Locker position performs unexpectedly, Continental 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 Continental will offset losses from the drop in Continental's long position.| Foot Locker vs. Abercrombie Fitch | Foot Locker vs. Urban Outfitters | Foot Locker vs. Childrens Place | Foot Locker vs. American Eagle Outfitters |
| Continental vs. Vera Bradley | Continental vs. Wolverine World Wide | Continental vs. Rocky Brands | Continental vs. Steven Madden |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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