Correlation Between Tile Shop and Continental
Can any of the company-specific risk be diversified away by investing in both Tile Shop 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 Tile Shop and Continental into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tile Shop Holdings and Caleres, you can compare the effects of market volatilities on Tile Shop 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 Tile Shop with a short position of Continental. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tile Shop and Continental.
Diversification Opportunities for Tile Shop and Continental
-0.64 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Tile and Continental is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Tile Shop Holdings and Caleres in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Continental and Tile Shop 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 Tile Shop Holdings 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 Tile Shop i.e., Tile Shop and Continental go up and down completely randomly.
Pair Corralation between Tile Shop and Continental
Given the investment horizon of 90 days Tile Shop Holdings is expected to under-perform the Continental. But the stock apears to be less risky and, when comparing its historical volatility, Tile Shop Holdings is 1.31 times less risky than Continental. The stock trades about -0.03 of its potential returns per unit of risk. The Caleres is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 3,062 in Caleres on August 31, 2024 and sell it today you would earn a total of 101.00 from holding Caleres or generate 3.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Tile Shop Holdings vs. Caleres
Performance |
| Timeline |
| Tile Shop Holdings |
| Continental |
Tile Shop and Continental Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tile Shop and Continental
The main advantage of trading using opposite Tile Shop and Continental positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tile Shop 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.| Tile Shop vs. RLJ Lodging Trust | Tile Shop vs. Aquagold International | Tile Shop vs. Stepstone Group | Tile Shop vs. Morningstar Unconstrained Allocation |
| Continental vs. Vera Bradley | Continental vs. Wolverine World Wide | Continental vs. Rocky Brands | Continental vs. Steven Madden |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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