Correlation Between Childrens Place and Cato

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

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

Diversification Opportunities for Childrens Place and Cato

0.84

Correlation Coefficient

Childrens Place  Cato

Very poor diversification

The 3 months correlation between Childrens and Cato is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Childrens Place and Cato Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cato and Childrens Place 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 Childrens Place 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 Childrens Place i.e., Childrens Place and Cato go up and down completely randomly.

Pair Corralation between Childrens Place and Cato

Given the investment horizon of 90 days Childrens Place is expected to under-perform the Cato. In addition to that, Childrens Place is 1.36 times more volatile than Cato Corporation. It trades about -0.03 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 29, 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	Strong
Accuracy	100.0%
Values	Daily Returns

Childrens Place  vs.  Cato Corp.

Childrens Place

Risk-Adjusted Performance

Very Weak

Over the last 90 days Childrens Place has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm 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 Childrens Place and Cato

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

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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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.