Correlation Between Shoe Carnival and Plexus Corp

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

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

Diversification Opportunities for Shoe Carnival and Plexus Corp

-0.64

Correlation Coefficient

Shoe Carnival  Plexus Corp

Excellent diversification

The 3 months correlation between Shoe and Plexus is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Shoe Carnival and Plexus Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Plexus Corp 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 Plexus Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Plexus Corp has no effect on the direction of Shoe Carnival i.e., Shoe Carnival and Plexus Corp go up and down completely randomly.

Pair Corralation between Shoe Carnival and Plexus Corp

Given the investment horizon of 90 days Shoe Carnival is expected to generate 1.72 times less return on investment than Plexus Corp. In addition to that, Shoe Carnival is 1.22 times more volatile than Plexus Corp. It trades about 0.05 of its total potential returns per unit of risk. Plexus Corp is currently generating about 0.11 per unit of volatility. If you would invest  10,579  in Plexus Corp on September 3, 2024 and sell it today you would earn a total of  5,861  from holding Plexus Corp or generate 55.4% 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.  Plexus Corp

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.

Plexus Corp

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Plexus Corp are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Plexus Corp unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shoe Carnival and Plexus Corp

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

The idea behind Shoe Carnival and Plexus Corp 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.