Correlation Between Shoe Carnival and Gap,

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

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

Diversification Opportunities for Shoe Carnival and Gap,

0.72

Correlation Coefficient

Shoe Carnival  Gap,

Poor diversification

The 3 months correlation between Shoe and Gap, is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Shoe Carnival and The Gap, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gap, 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 Gap,. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gap, has no effect on the direction of Shoe Carnival i.e., Shoe Carnival and Gap, go up and down completely randomly.

Pair Corralation between Shoe Carnival and Gap,

Given the investment horizon of 90 days Shoe Carnival is expected to under-perform the Gap,. But the stock apears to be less risky and, when comparing its historical volatility, Shoe Carnival is 1.46 times less risky than Gap,. The stock trades about -0.31 of its potential returns per unit of risk. The The Gap, is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  2,386  in The Gap, on December 23, 2024 and sell it today you would lose (384.00) from holding The Gap, or give up 16.09% of portfolio value over 90 days.

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

Shoe Carnival  vs.  The Gap,

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.

Gap,

Risk-Adjusted Performance

Very Weak

Over the last 90 days The Gap, has generated negative risk-adjusted returns adding no value to investors with long positions. Even with inconsistent performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Shoe Carnival and Gap,

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

The idea behind Shoe Carnival and The Gap, 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 Transaction History module to view history of all your transactions and understand their impact on performance.