Correlation Between Shoe Carnival and Dicks Sporting

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

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

Diversification Opportunities for Shoe Carnival and Dicks Sporting

-0.77

Correlation Coefficient

Shoe Carnival  Dicks Sporting

Pay attention - limited upside

The 3 months correlation between Shoe and Dicks is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Shoe Carnival and Dicks Sporting Goods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dicks Sporting Goods 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 Dicks Sporting. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dicks Sporting Goods has no effect on the direction of Shoe Carnival i.e., Shoe Carnival and Dicks Sporting go up and down completely randomly.

Pair Corralation between Shoe Carnival and Dicks Sporting

Given the investment horizon of 90 days Shoe Carnival is expected to under-perform the Dicks Sporting. In addition to that, Shoe Carnival is 1.2 times more volatile than Dicks Sporting Goods. It trades about -0.19 of its total potential returns per unit of risk. Dicks Sporting Goods is currently generating about 0.15 per unit of volatility. If you would invest  19,857  in Dicks Sporting Goods on November 19, 2024 and sell it today you would earn a total of  3,979  from holding Dicks Sporting Goods or generate 20.04% return on investment over 90 days.

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

Shoe Carnival  vs.  Dicks Sporting Goods

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

Dicks Sporting Goods

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dicks Sporting Goods are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent forward-looking signals, Dicks Sporting unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shoe Carnival and Dicks Sporting

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

The idea behind Shoe Carnival and Dicks Sporting Goods 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.