Correlation Between Genesco and Cato

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

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

Diversification Opportunities for Genesco and Cato

0.63

Correlation Coefficient

Genesco  Cato

Poor diversification

The 3 months correlation between Genesco and Cato is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Genesco and Cato Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cato and Genesco 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 Genesco 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 Genesco i.e., Genesco and Cato go up and down completely randomly.

Pair Corralation between Genesco and Cato

Considering the 90-day investment horizon Genesco is expected to under-perform the Cato. In addition to that, Genesco is 1.12 times more volatile than Cato Corporation. It trades about -0.24 of its total potential returns per unit of risk. Cato Corporation is currently generating about 0.03 per unit of volatility. If you would invest  378.00  in Cato Corporation on December 28, 2024 and sell it today you would earn a total of  12.00  from holding Cato Corporation or generate 3.17% return on investment over 90 days.

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

Genesco  vs.  Cato Corp.

Genesco

Risk-Adjusted Performance

Very Weak

Over the last 90 days Genesco has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's fundamental indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Cato

Risk-Adjusted Performance

Weak

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

Pair Trading with Genesco and Cato

The main advantage of trading using opposite Genesco and Cato positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Genesco 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 Genesco 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.

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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.