Correlation Between Genesco and Allbirds

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

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

Diversification Opportunities for Genesco and Allbirds

-0.53

Correlation Coefficient

Genesco  Allbirds

Excellent diversification

The 3 months correlation between Genesco and Allbirds is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Genesco and Allbirds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allbirds and Genesco 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 Genesco are associated (or correlated) with Allbirds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allbirds has no effect on the direction of Genesco i.e., Genesco and Allbirds go up and down completely randomly.

Pair Corralation between Genesco and Allbirds

Considering the 90-day investment horizon Genesco is expected to generate 0.67 times more return on investment than Allbirds. However, Genesco is 1.5 times less risky than Allbirds. It trades about 0.05 of its potential returns per unit of risk. Allbirds is currently generating about -0.07 per unit of risk. If you would invest  3,127  in Genesco on September 2, 2024 and sell it today you would earn a total of  232.00  from holding Genesco or generate 7.42% return on investment over 90 days.

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

Genesco  vs.  Allbirds

Genesco

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Genesco are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, Genesco may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Allbirds

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Allbirds has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Genesco and Allbirds

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

The idea behind Genesco and Allbirds 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.