Correlation Between Cato and Hibbett Sports

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

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

Diversification Opportunities for Cato and Hibbett Sports

0.0

Correlation Coefficient

Cato  Hibbett Sports

Pay attention - limited upside

The 3 months correlation between Cato and Hibbett is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Cato Corp. and Hibbett Sports in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hibbett Sports 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 Hibbett Sports. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hibbett Sports has no effect on the direction of Cato i.e., Cato and Hibbett Sports go up and down completely randomly.

Pair Corralation between Cato and Hibbett Sports

If you would invest  378.00  in Cato Corporation on December 28, 2024 and sell it today you would earn a total of  2.00  from holding Cato Corporation or generate 0.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Cato Corp.  vs.  Hibbett Sports

Cato

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Cato Corporation are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Cato is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Hibbett Sports

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hibbett Sports has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental drivers, Hibbett Sports is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Cato and Hibbett Sports

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

The idea behind Cato Corporation and Hibbett Sports 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.