Correlation Between AMCON Distributing and Cato

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

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

Diversification Opportunities for AMCON Distributing and Cato

-0.39

Correlation Coefficient

AMCON Distributing  Cato

Very good diversification

The 3 months correlation between AMCON and Cato is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding AMCON Distributing and Cato Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cato and AMCON Distributing 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 AMCON Distributing are associated (or correlated) with Cato. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cato has no effect on the direction of AMCON Distributing i.e., AMCON Distributing and Cato go up and down completely randomly.

Pair Corralation between AMCON Distributing and Cato

Considering the 90-day investment horizon AMCON Distributing is expected to generate 1.17 times more return on investment than Cato. However, AMCON Distributing is 1.17 times more volatile than Cato Corporation. It trades about 0.03 of its potential returns per unit of risk. Cato Corporation is currently generating about 0.01 per unit of risk. If you would invest  13,363  in AMCON Distributing on November 28, 2024 and sell it today you would earn a total of  348.00  from holding AMCON Distributing or generate 2.6% return on investment over 90 days.

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

AMCON Distributing  vs.  Cato Corp.

AMCON Distributing

Risk-Adjusted Performance

Weak

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

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.

Pair Trading with AMCON Distributing and Cato

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

The idea behind AMCON Distributing and Cato Corporation 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.