Correlation Between Continental and Footlocker

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Can any of the company-specific risk be diversified away by investing in both Continental and Footlocker 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 Continental and Footlocker into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caleres and Footlocker, you can compare the effects of market volatilities on Continental and Footlocker 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 Continental with a short position of Footlocker. Check out your portfolio center. Please also check ongoing floating volatility patterns of Continental and Footlocker.

Diversification Opportunities for Continental and Footlocker

-0.07
  Correlation Coefficient

Good diversification

The 3 months correlation between Continental and Footlocker is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Caleres and Footlocker in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Footlocker and Continental 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 Caleres are associated (or correlated) with Footlocker. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Footlocker has no effect on the direction of Continental i.e., Continental and Footlocker go up and down completely randomly.

Pair Corralation between Continental and Footlocker

Considering the 90-day investment horizon Caleres is expected to generate 1.01 times more return on investment than Footlocker. However, Continental is 1.01 times more volatile than Footlocker. It trades about -0.04 of its potential returns per unit of risk. Footlocker is currently generating about -0.23 per unit of risk. If you would invest  2,502  in Caleres on July 3, 2022 and sell it today you would lose (80.00)  from holding Caleres or give up 3.2% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy95.45%
ValuesDaily Returns

Caleres  vs.  Footlocker

 Performance (%) 
       Timeline  
Continental 
Continental Performance
0 of 100
Over the last 90 days Caleres has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest conflicting performance, the Stock's basic indicators remain steady and the new chaos on Wall Street may also be a sign of medium-term gains for the company stakeholders.

Continental Price Channel

Footlocker 
Footlocker Performance
7 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Footlocker are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting essential indicators, Footlocker revealed solid returns over the last few months and may actually be approaching a breakup point.

Footlocker Price Channel

Continental and Footlocker Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Continental and Footlocker

The main advantage of trading using opposite Continental and Footlocker positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Continental position performs unexpectedly, Footlocker 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 Footlocker will offset losses from the drop in Footlocker's long position.
Continental vs. Amazon Inc
The idea behind Caleres and Footlocker 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.
Footlocker vs. Amazon Inc
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.

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