Correlation Between Carters and Ermenegildo Zegna

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

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

Diversification Opportunities for Carters and Ermenegildo Zegna

0.79

Correlation Coefficient

Carters  Ermenegildo Zegna

Poor diversification

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

Pair Corralation between Carters and Ermenegildo Zegna

Considering the 90-day investment horizon Carters is expected to generate 1.03 times less return on investment than Ermenegildo Zegna. But when comparing it to its historical volatility, Carters is 1.19 times less risky than Ermenegildo Zegna. It trades about 0.01 of its potential returns per unit of risk. Ermenegildo Zegna NV is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  789.00  in Ermenegildo Zegna NV on August 30, 2024 and sell it today you would lose (1.00) from holding Ermenegildo Zegna NV or give up 0.13% of portfolio value over 90 days.

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

Carters  vs.  Ermenegildo Zegna NV

Carters

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Carters has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in December 2024. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Ermenegildo Zegna

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ermenegildo Zegna NV has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain very healthy which may send shares a bit higher in December 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Carters and Ermenegildo Zegna

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

The idea behind Carters and Ermenegildo Zegna NV 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.