Correlation Between Zumiez and Carters

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

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

Diversification Opportunities for Zumiez and Carters

0.22

Correlation Coefficient

Zumiez  Carters

Modest diversification

The 3 months correlation between Zumiez and Carters is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Zumiez Inc and Carters in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carters and Zumiez 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 Zumiez Inc are associated (or correlated) with Carters. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carters has no effect on the direction of Zumiez i.e., Zumiez and Carters go up and down completely randomly.

Pair Corralation between Zumiez and Carters

Given the investment horizon of 90 days Zumiez Inc is expected to generate 1.64 times more return on investment than Carters. However, Zumiez is 1.64 times more volatile than Carters. It trades about 0.01 of its potential returns per unit of risk. Carters is currently generating about -0.01 per unit of risk. If you would invest  2,201  in Zumiez Inc on September 24, 2024 and sell it today you would lose (293.00) from holding Zumiez Inc or give up 13.31% of portfolio value over 90 days.

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

Zumiez Inc  vs.  Carters

Zumiez Inc

Risk-Adjusted Performance

0 of 100

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 latest unfluctuating performance, the Stock's primary indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Carters

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Carters has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Zumiez and Carters

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

The idea behind Zumiez Inc and Carters 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.