Correlation Between Aritzia and Shoe Carnival

Can any of the company-specific risk be diversified away by investing in both Aritzia 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 Aritzia and Shoe Carnival into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Aritzia and Shoe Carnival, you can compare the effects of market volatilities on Aritzia 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 Aritzia with a short position of Shoe Carnival. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aritzia and Shoe Carnival.

Diversification Opportunities for Aritzia and Shoe Carnival

0.42

Correlation Coefficient

Aritzia  Shoe Carnival

Very weak diversification

The 3 months correlation between Aritzia and Shoe is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Aritzia and Shoe Carnival in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shoe Carnival and Aritzia 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 Aritzia 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 Aritzia i.e., Aritzia and Shoe Carnival go up and down completely randomly.

Pair Corralation between Aritzia and Shoe Carnival

Assuming the 90 days horizon Aritzia is expected to generate 0.67 times more return on investment than Shoe Carnival. However, Aritzia is 1.5 times less risky than Shoe Carnival. It trades about 0.34 of its potential returns per unit of risk. Shoe Carnival is currently generating about 0.02 per unit of risk. If you would invest  3,282  in Aritzia on September 24, 2024 and sell it today you would earn a total of  483.00  from holding Aritzia or generate 14.72% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.24%
Values	Daily Returns

Aritzia  vs.  Shoe Carnival

Aritzia

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Aritzia are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Aritzia may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Shoe Carnival

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shoe Carnival has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Aritzia and Shoe Carnival

The main advantage of trading using opposite Aritzia and Shoe Carnival positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aritzia 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.

The idea behind Aritzia and Shoe Carnival 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.