Correlation Between Movado and Boot Barn

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

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

Diversification Opportunities for Movado and Boot Barn

-0.18

Correlation Coefficient

Movado  Boot Barn

Good diversification

The 3 months correlation between Movado and Boot is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Movado Group and Boot Barn Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boot Barn Holdings and Movado 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 Movado Group are associated (or correlated) with Boot Barn. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boot Barn Holdings has no effect on the direction of Movado i.e., Movado and Boot Barn go up and down completely randomly.

Pair Corralation between Movado and Boot Barn

Considering the 90-day investment horizon Movado Group is expected to under-perform the Boot Barn. But the stock apears to be less risky and, when comparing its historical volatility, Movado Group is 1.36 times less risky than Boot Barn. The stock trades about -0.02 of its potential returns per unit of risk. The Boot Barn Holdings is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  5,958  in Boot Barn Holdings on September 16, 2024 and sell it today you would earn a total of  8,491  from holding Boot Barn Holdings or generate 142.51% return on investment over 90 days.

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

Movado Group  vs.  Boot Barn Holdings

Movado Group

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Movado Group are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Movado may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Boot Barn Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Boot Barn Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Boot Barn is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Movado and Boot Barn

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

The idea behind Movado Group and Boot Barn Holdings 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..