Correlation Between Shoe Carnival and Tokyo Electron

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

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

Diversification Opportunities for Shoe Carnival and Tokyo Electron

0.69

Correlation Coefficient

Shoe Carnival  Tokyo Electron

Poor diversification

The 3 months correlation between Shoe and Tokyo is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Shoe Carnival and Tokyo Electron in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tokyo Electron 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 Tokyo Electron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tokyo Electron has no effect on the direction of Shoe Carnival i.e., Shoe Carnival and Tokyo Electron go up and down completely randomly.

Pair Corralation between Shoe Carnival and Tokyo Electron

Given the investment horizon of 90 days Shoe Carnival is expected to under-perform the Tokyo Electron. But the stock apears to be less risky and, when comparing its historical volatility, Shoe Carnival is 1.24 times less risky than Tokyo Electron. The stock trades about -0.04 of its potential returns per unit of risk. The Tokyo Electron is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  16,082  in Tokyo Electron on October 3, 2024 and sell it today you would lose (1,677) from holding Tokyo Electron or give up 10.43% 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.  Tokyo Electron

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 weak performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Tokyo Electron

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tokyo Electron 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 essential indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Shoe Carnival and Tokyo Electron

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

The idea behind Shoe Carnival and Tokyo Electron 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.