Correlation Between Culp and Dixie

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

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

Diversification Opportunities for Culp and Dixie

-0.54

Correlation Coefficient

Culp  Dixie

Excellent diversification

The 3 months correlation between Culp and Dixie is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Culp Inc and The Dixie Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dixie Group and Culp 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 Culp Inc are associated (or correlated) with Dixie. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dixie Group has no effect on the direction of Culp i.e., Culp and Dixie go up and down completely randomly.

Pair Corralation between Culp and Dixie

If you would invest  553.00  in Culp Inc on September 27, 2024 and sell it today you would earn a total of  25.00  from holding Culp Inc or generate 4.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	2.33%
Values	Daily Returns

Culp Inc  vs.  The Dixie Group

Culp Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Culp Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable essential indicators, Culp is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Dixie Group

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days The Dixie Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very weak basic indicators, Dixie displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Culp and Dixie

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

The idea behind Culp Inc and The Dixie Group 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.