Correlation Between Foot Locker and Cato
Can any of the company-specific risk be diversified away by investing in both Foot Locker 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 Foot Locker and Cato into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Foot Locker and Cato Corporation, you can compare the effects of market volatilities on Foot Locker 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 Foot Locker with a short position of Cato. Check out your portfolio center. Please also check ongoing floating volatility patterns of Foot Locker and Cato.
Diversification Opportunities for Foot Locker and Cato
-0.61 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Foot and Cato is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Foot Locker and Cato Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cato 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 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 Foot Locker i.e., Foot Locker and Cato go up and down completely randomly.
Pair Corralation between Foot Locker and Cato
Allowing for the 90-day total investment horizon Foot Locker is expected to generate 1.53 times more return on investment than Cato. However, Foot Locker is 1.53 times more volatile than Cato Corporation. It trades about 0.0 of its potential returns per unit of risk. Cato Corporation is currently generating about -0.02 per unit of risk. If you would invest 3,710 in Foot Locker on August 24, 2024 and sell it today you would lose (1,376) from holding Foot Locker or give up 37.09% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Foot Locker vs. Cato Corp.
Performance |
| Timeline |
| Foot Locker |
| Cato |
Foot Locker and Cato Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Foot Locker and Cato
The main advantage of trading using opposite Foot Locker and Cato positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Foot Locker 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.| Foot Locker vs. Abercrombie Fitch | Foot Locker vs. Urban Outfitters | Foot Locker vs. Childrens Place | Foot Locker vs. American Eagle Outfitters |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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