Correlation Between Shoe Carnival and Zumiez

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

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

Diversification Opportunities for Shoe Carnival and Zumiez

0.91

Correlation Coefficient

Shoe Carnival  Zumiez

Almost no diversification

The 3 months correlation between Shoe and Zumiez is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Shoe Carnival and Zumiez Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zumiez Inc 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 Zumiez. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zumiez Inc has no effect on the direction of Shoe Carnival i.e., Shoe Carnival and Zumiez go up and down completely randomly.

Pair Corralation between Shoe Carnival and Zumiez

Given the investment horizon of 90 days Shoe Carnival is expected to under-perform the Zumiez. But the stock apears to be less risky and, when comparing its historical volatility, Shoe Carnival is 1.37 times less risky than Zumiez. The stock trades about -0.3 of its potential returns per unit of risk. The Zumiez Inc is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest  1,873  in Zumiez Inc on December 28, 2024 and sell it today you would lose (344.00) from holding Zumiez Inc or give up 18.37% of portfolio value over 90 days.

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

Shoe Carnival  vs.  Zumiez Inc

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 unfluctuating 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.

Zumiez Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Zumiez Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's primary indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Shoe Carnival and Zumiez

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

The idea behind Shoe Carnival and Zumiez Inc 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.