Correlation Between Foot Locker and Guess
Can any of the company-specific risk be diversified away by investing in both Foot Locker and Guess 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 Guess into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Foot Locker and Guess Inc, you can compare the effects of market volatilities on Foot Locker and Guess 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 Guess. Check out your portfolio center. Please also check ongoing floating volatility patterns of Foot Locker and Guess.
Diversification Opportunities for Foot Locker and Guess
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Foot and Guess is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Foot Locker and Guess Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guess Inc 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 Guess. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guess Inc has no effect on the direction of Foot Locker i.e., Foot Locker and Guess go up and down completely randomly.
Pair Corralation between Foot Locker and Guess
Allowing for the 90-day total investment horizon Foot Locker is expected to under-perform the Guess. In addition to that, Foot Locker is 1.46 times more volatile than Guess Inc. It trades about 0.0 of its total potential returns per unit of risk. Guess Inc is currently generating about 0.01 per unit of volatility. If you would invest 1,756 in Guess Inc on August 27, 2024 and sell it today you would lose (49.00) from holding Guess Inc or give up 2.79% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Foot Locker vs. Guess Inc
Performance |
| Timeline |
| Foot Locker |
| Guess Inc |
Foot Locker and Guess Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Foot Locker and Guess
The main advantage of trading using opposite Foot Locker and Guess positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Foot Locker position performs unexpectedly, Guess 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 Guess will offset losses from the drop in Guess' 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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