Correlation Between Carters and Zumiez

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

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

Diversification Opportunities for Carters and Zumiez

0.18

Correlation Coefficient

Carters  Zumiez

Average diversification

The 3 months correlation between Carters and Zumiez is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Carters and Zumiez Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zumiez Inc 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 Zumiez. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zumiez Inc has no effect on the direction of Carters i.e., Carters and Zumiez go up and down completely randomly.

Pair Corralation between Carters and Zumiez

Considering the 90-day investment horizon Carters is expected to under-perform the Zumiez. But the stock apears to be less risky and, when comparing its historical volatility, Carters is 1.66 times less risky than Zumiez. The stock trades about -0.03 of its potential returns per unit of risk. The Zumiez Inc is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  2,354  in Zumiez Inc on September 29, 2024 and sell it today you would lose (407.00) from holding Zumiez Inc or give up 17.29% of portfolio value over 90 days.

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

Carters  vs.  Zumiez Inc

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 January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Zumiez Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zumiez Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong primary indicators, Zumiez is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Carters and Zumiez

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

The idea behind Carters and Zumiez 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.