Correlation Between Dicks Sporting and Cato

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

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

Diversification Opportunities for Dicks Sporting and Cato

0.52

Correlation Coefficient

Dicks Sporting  Cato

Very weak diversification

The 3 months correlation between Dicks and Cato is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Dicks Sporting Goods and Cato Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cato and Dicks Sporting 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 Dicks Sporting Goods 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 Dicks Sporting i.e., Dicks Sporting and Cato go up and down completely randomly.

Pair Corralation between Dicks Sporting and Cato

Considering the 90-day investment horizon Dicks Sporting Goods is expected to under-perform the Cato. But the stock apears to be less risky and, when comparing its historical volatility, Dicks Sporting Goods is 1.46 times less risky than Cato. The stock trades about -0.08 of its potential returns per unit of risk. The Cato Corporation is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  393.00  in Cato Corporation on December 27, 2024 and sell it today you would lose (49.00) from holding Cato Corporation or give up 12.47% of portfolio value over 90 days.

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

Dicks Sporting Goods  vs.  Cato Corp.

Dicks Sporting Goods

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dicks Sporting Goods has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's forward-looking signals remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Cato

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cato Corporation has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest conflicting performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Dicks Sporting and Cato

The main advantage of trading using opposite Dicks Sporting and Cato positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dicks Sporting 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 Dicks Sporting Goods 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.