Correlation Between Cato and Genesco

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

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

Diversification Opportunities for Cato and Genesco

0.63

Correlation Coefficient

Cato  Genesco

Poor diversification

The 3 months correlation between Cato and Genesco is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Cato Corp. and Genesco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Genesco 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 Genesco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Genesco has no effect on the direction of Cato i.e., Cato and Genesco go up and down completely randomly.

Pair Corralation between Cato and Genesco

Given the investment horizon of 90 days Cato Corporation is expected to generate 0.89 times more return on investment than Genesco. However, Cato Corporation is 1.12 times less risky than Genesco. It trades about 0.03 of its potential returns per unit of risk. Genesco is currently generating about -0.24 per unit of risk. If you would invest  378.00  in Cato Corporation on December 28, 2024 and sell it today you would earn a total of  12.00  from holding Cato Corporation or generate 3.17% return on investment over 90 days.

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

Cato Corp.  vs.  Genesco

Cato

Risk-Adjusted Performance

Weak

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

Genesco

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Cato and Genesco

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

The idea behind Cato Corporation and Genesco 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.