Correlation Between Gap and Childrens Place

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

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

Diversification Opportunities for Gap and Childrens Place

0.01

Correlation Coefficient

Gap  Childrens Place

Significant diversification

The 3 months correlation between Gap and Childrens is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Gap Inc and Childrens Place in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Childrens Place 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 Gap Inc are associated (or correlated) with Childrens Place. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Childrens Place has no effect on the direction of Gap i.e., Gap and Childrens Place go up and down completely randomly.

Pair Corralation between Gap and Childrens Place

If you would invest  544.00  in Childrens Place on September 1, 2024 and sell it today you would earn a total of  1,048  from holding Childrens Place or generate 192.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	1.59%
Values	Daily Returns

Gap Inc  vs.  Childrens Place

Gap Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gap Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Gap is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Childrens Place

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Childrens Place are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain fundamental indicators, Childrens Place exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gap and Childrens Place

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

The idea behind Gap Inc and Childrens Place 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..