Correlation Between Shoe Carnival and Aritzia

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

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

Diversification Opportunities for Shoe Carnival and Aritzia

0.42

Correlation Coefficient

Shoe Carnival  Aritzia

Very weak diversification

The 3 months correlation between Shoe and Aritzia is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Shoe Carnival and Aritzia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aritzia and Shoe Carnival 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 Shoe Carnival are associated (or correlated) with Aritzia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aritzia has no effect on the direction of Shoe Carnival i.e., Shoe Carnival and Aritzia go up and down completely randomly.

Pair Corralation between Shoe Carnival and Aritzia

Given the investment horizon of 90 days Shoe Carnival is expected to generate 122.17 times less return on investment than Aritzia. In addition to that, Shoe Carnival is 1.53 times more volatile than Aritzia. It trades about 0.0 of its total potential returns per unit of risk. Aritzia is currently generating about 0.34 per unit of volatility. If you would invest  3,282  in Aritzia on September 24, 2024 and sell it today you would earn a total of  483.00  from holding Aritzia or generate 14.72% return on investment over 90 days.

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

Shoe Carnival  vs.  Aritzia

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 unfluctuating performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Aritzia

Risk-Adjusted Performance

2 of 100

Weak

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

Pair Trading with Shoe Carnival and Aritzia

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

The idea behind Shoe Carnival and Aritzia 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.