Correlation Between Boot Barn and Duluth Holdings

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

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

Diversification Opportunities for Boot Barn and Duluth Holdings

0.4

Correlation Coefficient

Boot Barn  Duluth Holdings

Very weak diversification

The 3 months correlation between Boot and Duluth is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Boot Barn Holdings and Duluth Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Duluth Holdings and Boot Barn 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 Boot Barn Holdings are associated (or correlated) with Duluth Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Duluth Holdings has no effect on the direction of Boot Barn i.e., Boot Barn and Duluth Holdings go up and down completely randomly.

Pair Corralation between Boot Barn and Duluth Holdings

Given the investment horizon of 90 days Boot Barn Holdings is expected to generate 0.89 times more return on investment than Duluth Holdings. However, Boot Barn Holdings is 1.13 times less risky than Duluth Holdings. It trades about 0.24 of its potential returns per unit of risk. Duluth Holdings is currently generating about 0.01 per unit of risk. If you would invest  12,867  in Boot Barn Holdings on September 5, 2024 and sell it today you would earn a total of  1,886  from holding Boot Barn Holdings or generate 14.66% return on investment over 90 days.

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

Boot Barn Holdings  vs.  Duluth Holdings

Boot Barn Holdings

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Boot Barn Holdings are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Boot Barn unveiled solid returns over the last few months and may actually be approaching a breakup point.

Duluth Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Duluth Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Duluth Holdings is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Boot Barn and Duluth Holdings

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

The idea behind Boot Barn Holdings and Duluth Holdings 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.