Correlation Between Shoe Carnival and Hurco Companies

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

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

Diversification Opportunities for Shoe Carnival and Hurco Companies

-0.32

Correlation Coefficient

Shoe Carnival  Hurco Companies

Very good diversification

The 3 months correlation between Shoe and Hurco is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Shoe Carnival and Hurco Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hurco Companies and Shoe Carnival 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 Shoe Carnival are associated (or correlated) with Hurco Companies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hurco Companies has no effect on the direction of Shoe Carnival i.e., Shoe Carnival and Hurco Companies go up and down completely randomly.

Pair Corralation between Shoe Carnival and Hurco Companies

Given the investment horizon of 90 days Shoe Carnival is expected to under-perform the Hurco Companies. In addition to that, Shoe Carnival is 1.29 times more volatile than Hurco Companies. It trades about -0.11 of its total potential returns per unit of risk. Hurco Companies is currently generating about -0.05 per unit of volatility. If you would invest  2,107  in Hurco Companies on September 28, 2024 and sell it today you would lose (178.00) from holding Hurco Companies or give up 8.45% of portfolio value over 90 days.

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

Shoe Carnival  vs.  Hurco Companies

Shoe Carnival

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shoe Carnival has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating 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.

Hurco Companies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hurco Companies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Shoe Carnival and Hurco Companies

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

The idea behind Shoe Carnival and Hurco Companies 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.