Correlation Between Foot Locker and Noodles
Can any of the company-specific risk be diversified away by investing in both Foot Locker and Noodles 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 Noodles into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Foot Locker and Noodles Company, you can compare the effects of market volatilities on Foot Locker and Noodles 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 Noodles. Check out your portfolio center. Please also check ongoing floating volatility patterns of Foot Locker and Noodles.
Diversification Opportunities for Foot Locker and Noodles
-0.05 | Correlation Coefficient |
Good diversification
The 3 months correlation between Foot and Noodles is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Foot Locker and Noodles Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Noodles Company 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 Noodles. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Noodles Company has no effect on the direction of Foot Locker i.e., Foot Locker and Noodles go up and down completely randomly.
Pair Corralation between Foot Locker and Noodles
Allowing for the 90-day total investment horizon Foot Locker is expected to under-perform the Noodles. But the stock apears to be less risky and, when comparing its historical volatility, Foot Locker is 1.17 times less risky than Noodles. The stock trades about -0.39 of its potential returns per unit of risk. The Noodles Company is currently generating about -0.3 of returns per unit of risk over similar time horizon. If you would invest 132.00 in Noodles Company on January 9, 2025 and sell it today you would lose (39.00) from holding Noodles Company or give up 29.55% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Foot Locker vs. Noodles Company
Performance |
| Timeline |
| Foot Locker |
| Noodles Company |
Foot Locker and Noodles Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Foot Locker and Noodles
The main advantage of trading using opposite Foot Locker and Noodles positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Foot Locker position performs unexpectedly, Noodles 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 Noodles will offset losses from the drop in Noodles' 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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