Correlation Between Victorias Secret and Cato

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

By analyzing existing cross correlation between Victorias Secret Co and Cato Corporation, you can compare the effects of market volatilities on Victorias Secret and Cato 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 Victorias Secret with a short position of Cato. Check out your portfolio center. Please also check ongoing floating volatility patterns of Victorias Secret and Cato.

Diversification Opportunities for Victorias Secret and Cato

-0.66

Correlation Coefficient

Victorias Secret  Cato

Excellent diversification

The 3 months correlation between Victorias and Cato is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Victorias Secret Co and Cato Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cato and Victorias Secret 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 Victorias Secret Co are associated (or correlated) with Cato. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cato has no effect on the direction of Victorias Secret i.e., Victorias Secret and Cato go up and down completely randomly.

Pair Corralation between Victorias Secret and Cato

Given the investment horizon of 90 days Victorias Secret Co is expected to generate 1.21 times more return on investment than Cato. However, Victorias Secret is 1.21 times more volatile than Cato Corporation. It trades about 0.1 of its potential returns per unit of risk. Cato Corporation is currently generating about -0.03 per unit of risk. If you would invest  1,610  in Victorias Secret Co on September 26, 2024 and sell it today you would earn a total of  2,554  from holding Victorias Secret Co or generate 158.63% return on investment over 90 days.

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

Victorias Secret Co  vs.  Cato Corp.

Victorias Secret

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Victorias Secret Co are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, Victorias Secret displayed solid returns over the last few months and may actually be approaching a breakup point.

Cato

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cato Corporation has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Victorias Secret and Cato

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

The idea behind Victorias Secret Co and Cato Corporation 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.