Correlation Between Shoe Carnival and Cato
Can any of the company-specific risk be diversified away by investing in both Shoe Carnival 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 Shoe Carnival and Cato into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Shoe Carnival and Cato Corporation, you can compare the effects of market volatilities on Shoe Carnival 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 Shoe Carnival with a short position of Cato. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shoe Carnival and Cato.
Diversification Opportunities for Shoe Carnival and Cato
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Shoe and Cato is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Shoe Carnival and Cato Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cato and Shoe Carnival 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 Shoe Carnival 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 Shoe Carnival i.e., Shoe Carnival and Cato go up and down completely randomly.
Pair Corralation between Shoe Carnival and Cato
Given the investment horizon of 90 days Shoe Carnival is expected to generate 0.67 times more return on investment than Cato. However, Shoe Carnival is 1.48 times less risky than Cato. It trades about 0.04 of its potential returns per unit of risk. Cato Corporation is currently generating about -0.04 per unit of risk. If you would invest 2,506 in Shoe Carnival on October 20, 2024 and sell it today you would earn a total of 489.00 from holding Shoe Carnival or generate 19.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Shoe Carnival vs. Cato Corp.
Performance |
| Timeline |
| Shoe Carnival |
| Cato |
Shoe Carnival and Cato Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Shoe Carnival and Cato
The main advantage of trading using opposite Shoe Carnival and Cato positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shoe Carnival 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.| Shoe Carnival vs. Citi Trends | Shoe Carnival vs. Zumiez Inc | Shoe Carnival vs. Buckle 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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