Correlation Between Cato and Gap,

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

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

Diversification Opportunities for Cato and Gap,

-0.91

Correlation Coefficient

Cato  Gap,

Pay attention - limited upside

The 3 months correlation between Cato and Gap, is -0.91. Overlapping area represents the amount of risk that can be diversified away by holding Cato Corp. and The Gap, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gap, and Cato 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 Cato Corporation are associated (or correlated) with Gap,. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gap, has no effect on the direction of Cato i.e., Cato and Gap, go up and down completely randomly.

Pair Corralation between Cato and Gap,

Given the investment horizon of 90 days Cato is expected to generate 2.6 times less return on investment than Gap,. In addition to that, Cato is 1.09 times more volatile than The Gap,. It trades about 0.04 of its total potential returns per unit of risk. The Gap, is currently generating about 0.11 per unit of volatility. If you would invest  2,386  in The Gap, on October 23, 2024 and sell it today you would earn a total of  109.00  from holding The Gap, or generate 4.57% return on investment over 90 days.

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

Cato Corp.  vs.  The Gap,

Cato

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cato Corporation has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Gap,

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in The Gap, are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Gap, may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Cato and Gap,

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

The idea behind Cato Corporation and The Gap, 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.