Correlation Between Reitmans and Shoe Carnival

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

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

Diversification Opportunities for Reitmans and Shoe Carnival

0.12

Correlation Coefficient

Reitmans  Shoe Carnival

Average diversification

The 3 months correlation between Reitmans and Shoe is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Reitmans Limited and Shoe Carnival in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shoe Carnival and Reitmans 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 Reitmans Limited are associated (or correlated) with Shoe Carnival. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shoe Carnival has no effect on the direction of Reitmans i.e., Reitmans and Shoe Carnival go up and down completely randomly.

Pair Corralation between Reitmans and Shoe Carnival

Assuming the 90 days horizon Reitmans Limited is expected to generate 0.48 times more return on investment than Shoe Carnival. However, Reitmans Limited is 2.09 times less risky than Shoe Carnival. It trades about -0.21 of its potential returns per unit of risk. Shoe Carnival is currently generating about -0.1 per unit of risk. If you would invest  200.00  in Reitmans Limited on October 5, 2024 and sell it today you would lose (14.00) from holding Reitmans Limited or give up 7.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Reitmans Limited  vs.  Shoe Carnival

Reitmans Limited

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Reitmans Limited are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Reitmans is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Shoe Carnival

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shoe Carnival has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Reitmans and Shoe Carnival

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

The idea behind Reitmans Limited and Shoe Carnival 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.