Correlation Between Carters and Peloton Interactive

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

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

Diversification Opportunities for Carters and Peloton Interactive

-0.83

Correlation Coefficient

Carters  Peloton Interactive

Pay attention - limited upside

The 3 months correlation between Carters and Peloton is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding Carters and Peloton Interactive in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Peloton Interactive and Carters 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 Carters are associated (or correlated) with Peloton Interactive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Peloton Interactive has no effect on the direction of Carters i.e., Carters and Peloton Interactive go up and down completely randomly.

Pair Corralation between Carters and Peloton Interactive

Considering the 90-day investment horizon Carters is expected to under-perform the Peloton Interactive. But the stock apears to be less risky and, when comparing its historical volatility, Carters is 2.31 times less risky than Peloton Interactive. The stock trades about -0.12 of its potential returns per unit of risk. The Peloton Interactive is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  472.00  in Peloton Interactive on September 14, 2024 and sell it today you would earn a total of  492.50  from holding Peloton Interactive or generate 104.34% return on investment over 90 days.

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

Carters  vs.  Peloton Interactive

Carters

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Carters has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Peloton Interactive

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Peloton Interactive are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Peloton Interactive displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Carters and Peloton Interactive

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

The idea behind Carters and Peloton Interactive 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.