Correlation Between Shoe Carnival and Lands End

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

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

Diversification Opportunities for Shoe Carnival and Lands End

0.88

Correlation Coefficient

Shoe Carnival  Lands End

Very poor diversification

The 3 months correlation between Shoe and Lands is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Shoe Carnival and Lands End in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lands End 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 Lands End. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lands End has no effect on the direction of Shoe Carnival i.e., Shoe Carnival and Lands End go up and down completely randomly.

Pair Corralation between Shoe Carnival and Lands End

Given the investment horizon of 90 days Shoe Carnival is expected to under-perform the Lands End. But the stock apears to be less risky and, when comparing its historical volatility, Shoe Carnival is 1.46 times less risky than Lands End. The stock trades about -0.33 of its potential returns per unit of risk. The Lands End is currently generating about -0.11 of returns per unit of risk over similar time horizon. If you would invest  1,340  in Lands End on December 27, 2024 and sell it today you would lose (313.00) from holding Lands End or give up 23.36% 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.  Lands End

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.

Lands End

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lands End has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Shoe Carnival and Lands End

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

The idea behind Shoe Carnival and Lands End 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.