Correlation Between Steven Madden and Continental

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Can any of the company-specific risk be diversified away by investing in both Steven Madden and Continental 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 Steven Madden and Continental into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Steven Madden and Caleres, you can compare the effects of market volatilities on Steven Madden and Continental 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 Steven Madden with a short position of Continental. Check out your portfolio center. Please also check ongoing floating volatility patterns of Steven Madden and Continental.

Diversification Opportunities for Steven Madden and Continental

-0.25
  Correlation Coefficient

Very good diversification

The 3 months correlation between Steven and Continental is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Steven Madden and Caleres in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Continental and Steven Madden 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 Steven Madden are associated (or correlated) with Continental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Continental has no effect on the direction of Steven Madden i.e., Steven Madden and Continental go up and down completely randomly.

Pair Corralation between Steven Madden and Continental

Given the investment horizon of 90 days Steven Madden is expected to under-perform the Continental. But the stock apears to be less risky and, when comparing its historical volatility, Steven Madden is 1.68 times less risky than Continental. The stock trades about -0.18 of its potential returns per unit of risk. The Caleres is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  2,987  in Caleres on August 23, 2024 and sell it today you would earn a total of  59.00  from holding Caleres or generate 1.98% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Steven Madden  vs.  Caleres

 Performance 
       Timeline  
Steven Madden 

Risk-Adjusted Performance

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Weak
 
Strong
Very Weak
Over the last 90 days Steven Madden has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Steven Madden is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.
Continental 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Caleres has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in December 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Steven Madden and Continental Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Steven Madden and Continental

The main advantage of trading using opposite Steven Madden and Continental positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Steven Madden position performs unexpectedly, Continental 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 Continental will offset losses from the drop in Continental's long position.
The idea behind Steven Madden and Caleres pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.

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