Correlation Between Foot Locker and Auna SA

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

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

Diversification Opportunities for Foot Locker and Auna SA

0.31

Correlation Coefficient

Foot Locker  Auna SA

Weak diversification

The 3 months correlation between Foot and Auna is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Foot Locker and Auna SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Auna SA and Foot Locker 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 Foot Locker are associated (or correlated) with Auna SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Auna SA has no effect on the direction of Foot Locker i.e., Foot Locker and Auna SA go up and down completely randomly.

Pair Corralation between Foot Locker and Auna SA

Allowing for the 90-day total investment horizon Foot Locker is expected to under-perform the Auna SA. But the stock apears to be less risky and, when comparing its historical volatility, Foot Locker is 1.13 times less risky than Auna SA. The stock trades about -0.01 of its potential returns per unit of risk. The Auna SA is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  697.00  in Auna SA on October 8, 2024 and sell it today you would earn a total of  4.00  from holding Auna SA or generate 0.57% return on investment over 90 days.

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

Foot Locker  vs.  Auna SA

Foot Locker

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Foot Locker has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent essential indicators, Foot Locker is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Auna SA

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Auna SA are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, Auna SA may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Foot Locker and Auna SA

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

The idea behind Foot Locker and Auna SA 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.