Correlation Between Foot Locker and Zumiez

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

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

Diversification Opportunities for Foot Locker and Zumiez

0.38

Correlation Coefficient

Foot Locker  Zumiez

Weak diversification

The 3 months correlation between Foot and Zumiez is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Foot Locker and Zumiez Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zumiez Inc 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 Zumiez. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zumiez Inc has no effect on the direction of Foot Locker i.e., Foot Locker and Zumiez go up and down completely randomly.

Pair Corralation between Foot Locker and Zumiez

Allowing for the 90-day total investment horizon Foot Locker is expected to generate 0.66 times more return on investment than Zumiez. However, Foot Locker is 1.52 times less risky than Zumiez. It trades about -0.18 of its potential returns per unit of risk. Zumiez Inc is currently generating about -0.2 per unit of risk. If you would invest  2,456  in Foot Locker on September 26, 2024 and sell it today you would lose (277.00) from holding Foot Locker or give up 11.28% of portfolio value over 90 days.

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

Foot Locker  vs.  Zumiez Inc

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 unfluctuating performance in the last few months, the Stock's essential indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Zumiez Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zumiez Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's primary indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Foot Locker and Zumiez

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

The idea behind Foot Locker and Zumiez Inc 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.