Correlation Between Shoe Carnival and Big 5

Can any of the company-specific risk be diversified away by investing in both Shoe Carnival and Big 5 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 Big 5 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Shoe Carnival and Big 5 Sporting, you can compare the effects of market volatilities on Shoe Carnival and Big 5 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 Big 5. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shoe Carnival and Big 5.

Diversification Opportunities for Shoe Carnival and Big 5

0.87

Correlation Coefficient

Shoe Carnival  Big 5

Very poor diversification

The 3 months correlation between Shoe and Big is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Shoe Carnival and Big 5 Sporting in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Big 5 Sporting 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 Big 5. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Big 5 Sporting has no effect on the direction of Shoe Carnival i.e., Shoe Carnival and Big 5 go up and down completely randomly.

Pair Corralation between Shoe Carnival and Big 5

Given the investment horizon of 90 days Shoe Carnival is expected to generate 0.82 times more return on investment than Big 5. However, Shoe Carnival is 1.21 times less risky than Big 5. It trades about -0.33 of its potential returns per unit of risk. Big 5 Sporting is currently generating about -0.32 per unit of risk. If you would invest  3,551  in Shoe Carnival on December 27, 2024 and sell it today you would lose (1,353) from holding Shoe Carnival or give up 38.1% of portfolio value over 90 days.

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

Shoe Carnival  vs.  Big 5 Sporting

Shoe Carnival

Risk-Adjusted Performance

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 April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Big 5 Sporting

Risk-Adjusted Performance

Very Weak

Over the last 90 days Big 5 Sporting has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's technical and fundamental indicators remain fairly stable which may send shares a bit higher in April 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Shoe Carnival and Big 5

The main advantage of trading using opposite Shoe Carnival and Big 5 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shoe Carnival position performs unexpectedly, Big 5 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 Big 5 will offset losses from the drop in Big 5's long position.

The idea behind Shoe Carnival and Big 5 Sporting 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..