Correlation Between Continental and Hour Loop

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

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

Diversification Opportunities for Continental and Hour Loop

0.51

Correlation Coefficient

Continental  Hour Loop

Very weak diversification

The 3 months correlation between Continental and Hour is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Caleres and Hour Loop in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hour Loop and Continental 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 Caleres are associated (or correlated) with Hour Loop. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hour Loop has no effect on the direction of Continental i.e., Continental and Hour Loop go up and down completely randomly.

Pair Corralation between Continental and Hour Loop

Considering the 90-day investment horizon Caleres is expected to generate 0.41 times more return on investment than Hour Loop. However, Caleres is 2.47 times less risky than Hour Loop. It trades about -0.16 of its potential returns per unit of risk. Hour Loop is currently generating about -0.1 per unit of risk. If you would invest  2,285  in Caleres on December 29, 2024 and sell it today you would lose (555.00) from holding Caleres or give up 24.29% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Caleres  vs.  Hour Loop

Continental

Risk-Adjusted Performance

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 April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Hour Loop

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hour Loop has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Continental and Hour Loop

The main advantage of trading using opposite Continental and Hour Loop positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Continental position performs unexpectedly, Hour Loop 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 Hour Loop will offset losses from the drop in Hour Loop's long position.

The idea behind Caleres and Hour Loop 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.

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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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.