Correlation Between Shoe Carnival and Duluth Holdings

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

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

Diversification Opportunities for Shoe Carnival and Duluth Holdings

0.32

Correlation Coefficient

Shoe Carnival  Duluth Holdings

Weak diversification

The 3 months correlation between Shoe and Duluth is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Shoe Carnival and Duluth Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Duluth Holdings 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 Duluth Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Duluth Holdings has no effect on the direction of Shoe Carnival i.e., Shoe Carnival and Duluth Holdings go up and down completely randomly.

Pair Corralation between Shoe Carnival and Duluth Holdings

Given the investment horizon of 90 days Shoe Carnival is expected to under-perform the Duluth Holdings. But the stock apears to be less risky and, when comparing its historical volatility, Shoe Carnival is 1.01 times less risky than Duluth Holdings. The stock trades about -0.05 of its potential returns per unit of risk. The Duluth Holdings is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  393.00  in Duluth Holdings on September 1, 2024 and sell it today you would lose (10.00) from holding Duluth Holdings or give up 2.54% of portfolio value over 90 days.

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

Shoe Carnival  vs.  Duluth Holdings

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 latest weak performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Duluth Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Duluth Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Duluth Holdings is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Shoe Carnival and Duluth Holdings

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

The idea behind Shoe Carnival and Duluth Holdings 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.