Correlation Between Boot Barn and Guess

Can any of the company-specific risk be diversified away by investing in both Boot Barn and Guess 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 Guess 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 Guess Inc, you can compare the effects of market volatilities on Boot Barn and Guess 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 Guess. Check out your portfolio center. Please also check ongoing floating volatility patterns of Boot Barn and Guess.

Diversification Opportunities for Boot Barn and Guess

0.79

Correlation Coefficient

Boot Barn  Guess

Poor diversification

The 3 months correlation between Boot and Guess is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Boot Barn Holdings and Guess Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guess Inc 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 Guess. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guess Inc has no effect on the direction of Boot Barn i.e., Boot Barn and Guess go up and down completely randomly.

Pair Corralation between Boot Barn and Guess

Given the investment horizon of 90 days Boot Barn Holdings is expected to generate 1.41 times more return on investment than Guess. However, Boot Barn is 1.41 times more volatile than Guess Inc. It trades about -0.01 of its potential returns per unit of risk. Guess Inc is currently generating about -0.12 per unit of risk. If you would invest  15,455  in Boot Barn Holdings on September 13, 2024 and sell it today you would lose (839.00) from holding Boot Barn Holdings or give up 5.43% of portfolio value over 90 days.

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

Boot Barn Holdings  vs.  Guess Inc

Boot Barn Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

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

Guess Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Guess Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Boot Barn and Guess

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

The idea behind Boot Barn Holdings and Guess 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.

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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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.