Correlation Between Continental and ASICS

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

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

Diversification Opportunities for Continental and ASICS

0.44

Correlation Coefficient

Continental  ASICS

Very weak diversification

The 3 months correlation between Continental and ASICS is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Caleres and ASICS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ASICS 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 ASICS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ASICS has no effect on the direction of Continental i.e., Continental and ASICS go up and down completely randomly.

Pair Corralation between Continental and ASICS

Considering the 90-day investment horizon Caleres is expected to under-perform the ASICS. In addition to that, Continental is 1.61 times more volatile than ASICS. It trades about -0.1 of its total potential returns per unit of risk. ASICS is currently generating about -0.12 per unit of volatility. If you would invest  1,850  in ASICS on September 17, 2024 and sell it today you would lose (320.00) from holding ASICS or give up 17.3% of portfolio value over 90 days.

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

Caleres  vs.  ASICS

Continental

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Caleres has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

ASICS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ASICS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite abnormal performance in the last few months, the Stock's fundamental indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Continental and ASICS

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

The idea behind Caleres and ASICS 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 Transaction History module to view history of all your transactions and understand their impact on performance.