Correlation Between Genuine Parts and Cato

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

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

Diversification Opportunities for Genuine Parts and Cato

-0.76

Correlation Coefficient

Genuine Parts  Cato

Pay attention - limited upside

The 3 months correlation between Genuine and Cato is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Genuine Parts Co and Cato Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cato and Genuine Parts 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 Genuine Parts Co 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 Genuine Parts i.e., Genuine Parts and Cato go up and down completely randomly.

Pair Corralation between Genuine Parts and Cato

Considering the 90-day investment horizon Genuine Parts is expected to generate 1.3 times less return on investment than Cato. But when comparing it to its historical volatility, Genuine Parts Co is 2.56 times less risky than Cato. It trades about 0.06 of its potential returns per unit of risk. Cato Corporation is currently generating about 0.03 of returns per unit of risk over similar time horizon. 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 Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Genuine Parts Co  vs.  Cato Corp.

Genuine Parts

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Genuine Parts Co are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Genuine Parts is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

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 Genuine Parts and Cato

The main advantage of trading using opposite Genuine Parts and Cato positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Genuine Parts 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 Genuine Parts Co 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.