Correlation Between Foot Locker and Gap,

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

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

Diversification Opportunities for Foot Locker and Gap,

-0.46

Correlation Coefficient

Foot Locker  Gap,

Very good diversification

The 3 months correlation between Foot and Gap, is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Foot Locker and The Gap, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gap, and Foot Locker 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 Foot Locker are associated (or correlated) with Gap,. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gap, has no effect on the direction of Foot Locker i.e., Foot Locker and Gap, go up and down completely randomly.

Pair Corralation between Foot Locker and Gap,

Allowing for the 90-day total investment horizon Foot Locker is expected to under-perform the Gap,. But the stock apears to be less risky and, when comparing its historical volatility, Foot Locker is 1.04 times less risky than Gap,. The stock trades about -0.11 of its potential returns per unit of risk. The The Gap, is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  2,106  in The Gap, on September 13, 2024 and sell it today you would earn a total of  416.00  from holding The Gap, or generate 19.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Foot Locker  vs.  The Gap,

Foot Locker

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Foot Locker has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's essential 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.

Gap,

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The Gap, are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting basic indicators, Gap, reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Foot Locker and Gap,

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

The idea behind Foot Locker and The Gap, 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.

Check out your portfolio center.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.