Correlation Between Foot Locker and Thor Industries
Can any of the company-specific risk be diversified away by investing in both Foot Locker and Thor Industries 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 Thor Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Foot Locker and Thor Industries, you can compare the effects of market volatilities on Foot Locker and Thor Industries 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 Thor Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Foot Locker and Thor Industries.
Diversification Opportunities for Foot Locker and Thor Industries
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Foot and Thor is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Foot Locker and Thor Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thor Industries 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 Thor Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thor Industries has no effect on the direction of Foot Locker i.e., Foot Locker and Thor Industries go up and down completely randomly.
Pair Corralation between Foot Locker and Thor Industries
Allowing for the 90-day total investment horizon Foot Locker is expected to generate 1.38 times more return on investment than Thor Industries. However, Foot Locker is 1.38 times more volatile than Thor Industries. It trades about -0.13 of its potential returns per unit of risk. Thor Industries is currently generating about -0.32 per unit of risk. If you would invest 2,189 in Foot Locker on October 12, 2024 and sell it today you would lose (133.00) from holding Foot Locker or give up 6.08% 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. Thor Industries
Performance |
| Timeline |
| Foot Locker |
| Thor Industries |
Foot Locker and Thor Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Foot Locker and Thor Industries
The main advantage of trading using opposite Foot Locker and Thor Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Foot Locker position performs unexpectedly, Thor Industries 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 Thor Industries will offset losses from the drop in Thor Industries' long position.| Foot Locker vs. Abercrombie Fitch | Foot Locker vs. Urban Outfitters | Foot Locker vs. Childrens Place | Foot Locker vs. American Eagle Outfitters |
| Thor Industries vs. Marine Products | Thor Industries vs. Malibu Boats | Thor Industries vs. Brunswick | Thor Industries vs. LCI Industries |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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