Correlation Between Gap, and Carters

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

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

Diversification Opportunities for Gap, and Carters

-0.29

Correlation Coefficient

Gap,  Carters

Very good diversification

The 3 months correlation between Gap, and Carters is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding The Gap, and Carters in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carters and Gap, 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 The Gap, are associated (or correlated) with Carters. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carters has no effect on the direction of Gap, i.e., Gap, and Carters go up and down completely randomly.

Pair Corralation between Gap, and Carters

Considering the 90-day investment horizon The Gap, is expected to generate 1.07 times more return on investment than Carters. However, Gap, is 1.07 times more volatile than Carters. It trades about 0.07 of its potential returns per unit of risk. Carters is currently generating about -0.09 per unit of risk. If you would invest  2,189  in The Gap, on September 29, 2024 and sell it today you would earn a total of  239.00  from holding The Gap, or generate 10.92% return on investment over 90 days.

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

The Gap,  vs.  Carters

Gap,

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in The Gap, are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating basic indicators, Gap, reported solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Gap, and Carters

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

The idea behind The Gap, and Carters 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.