Correlation Between Zumiez and Gap

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

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

Diversification Opportunities for Zumiez and Gap

-0.13

Correlation Coefficient

Zumiez  Gap

Good diversification

The 3 months correlation between Zumiez and Gap is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Zumiez Inc and Gap Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gap Inc 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 Gap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gap Inc has no effect on the direction of Zumiez i.e., Zumiez and Gap go up and down completely randomly.

Pair Corralation between Zumiez and Gap

Given the investment horizon of 90 days Zumiez Inc is expected to generate 1.02 times more return on investment than Gap. However, Zumiez is 1.02 times more volatile than Gap Inc. It trades about 0.01 of its potential returns per unit of risk. Gap Inc is currently generating about 0.0 per unit of risk. If you would invest  1,948  in Zumiez Inc on September 26, 2024 and sell it today you would lose (51.00) from holding Zumiez Inc or give up 2.62% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	34.4%
Values	Daily Returns

Zumiez Inc  vs.  Gap Inc

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.

Gap Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gap Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Gap is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Zumiez and Gap

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

The idea behind Zumiez Inc and Gap 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.

Check out your portfolio center.

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 Transaction History module to view history of all your transactions and understand their impact on performance.