Correlation Between Good Vibrations and Continental

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

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

Diversification Opportunities for Good Vibrations and Continental

-0.7

Correlation Coefficient

Good Vibrations  Continental

Excellent diversification

The 3 months correlation between Good and Continental is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Good Vibrations Shoes and Caleres in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Continental and Good Vibrations 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 Good Vibrations Shoes are associated (or correlated) with Continental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Continental has no effect on the direction of Good Vibrations i.e., Good Vibrations and Continental go up and down completely randomly.

Pair Corralation between Good Vibrations and Continental

Given the investment horizon of 90 days Good Vibrations Shoes is expected to generate 2.87 times more return on investment than Continental. However, Good Vibrations is 2.87 times more volatile than Caleres. It trades about 0.12 of its potential returns per unit of risk. Caleres is currently generating about -0.1 per unit of risk. If you would invest  0.21  in Good Vibrations Shoes on September 17, 2024 and sell it today you would earn a total of  0.13  from holding Good Vibrations Shoes or generate 61.9% return on investment over 90 days.

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

Good Vibrations Shoes  vs.  Caleres

Good Vibrations Shoes

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Good Vibrations Shoes are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite fairly abnormal basic indicators, Good Vibrations demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Continental

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Good Vibrations and Continental

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

The idea behind Good Vibrations Shoes and Caleres 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.