Correlation Between Childrens Place and Shoe Carnival
Can any of the company-specific risk be diversified away by investing in both Childrens Place and Shoe Carnival 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 Childrens Place and Shoe Carnival into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Childrens Place and Shoe Carnival, you can compare the effects of market volatilities on Childrens Place and Shoe Carnival 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 Childrens Place with a short position of Shoe Carnival. Check out your portfolio center. Please also check ongoing floating volatility patterns of Childrens Place and Shoe Carnival.
Diversification Opportunities for Childrens Place and Shoe Carnival
-0.05 | Correlation Coefficient |
Good diversification
The 3 months correlation between Childrens and Shoe is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Childrens Place and Shoe Carnival in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shoe Carnival and Childrens Place 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 Childrens Place are associated (or correlated) with Shoe Carnival. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shoe Carnival has no effect on the direction of Childrens Place i.e., Childrens Place and Shoe Carnival go up and down completely randomly.
Pair Corralation between Childrens Place and Shoe Carnival
Given the investment horizon of 90 days Childrens Place is expected to generate 3.26 times more return on investment than Shoe Carnival. However, Childrens Place is 3.26 times more volatile than Shoe Carnival. It trades about 0.02 of its potential returns per unit of risk. Shoe Carnival is currently generating about 0.04 per unit of risk. If you would invest 3,579 in Childrens Place on August 24, 2024 and sell it today you would lose (1,949) from holding Childrens Place or give up 54.46% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Childrens Place vs. Shoe Carnival
Performance |
| Timeline |
| Childrens Place |
| Shoe Carnival |
Childrens Place and Shoe Carnival Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Childrens Place and Shoe Carnival
The main advantage of trading using opposite Childrens Place and Shoe Carnival positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Childrens Place position performs unexpectedly, Shoe Carnival 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 Shoe Carnival will offset losses from the drop in Shoe Carnival's long position.| Childrens Place vs. Ross Stores | Childrens Place vs. Buckle Inc | Childrens Place vs. Guess Inc | Childrens Place vs. Abercrombie Fitch |
| Shoe Carnival vs. Ross Stores | Shoe Carnival vs. Childrens Place | Shoe Carnival vs. Guess Inc | Shoe Carnival vs. Cato Corporation |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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