Correlation Between Columbia Sportswear and Carters

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Can any of the company-specific risk be diversified away by investing in both Columbia Sportswear 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 Columbia Sportswear and Carters into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Columbia Sportswear and Carters, you can compare the effects of market volatilities on Columbia Sportswear 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 Columbia Sportswear with a short position of Carters. Check out your portfolio center. Please also check ongoing floating volatility patterns of Columbia Sportswear and Carters.

Diversification Opportunities for Columbia Sportswear and Carters

0.38
  Correlation Coefficient

Weak diversification

The 3 months correlation between Columbia and Carters is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Columbia Sportswear and Carters in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carters and Columbia Sportswear 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 Columbia Sportswear 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 Columbia Sportswear i.e., Columbia Sportswear and Carters go up and down completely randomly.

Pair Corralation between Columbia Sportswear and Carters

Given the investment horizon of 90 days Columbia Sportswear is expected to generate 1.71 times less return on investment than Carters. But when comparing it to its historical volatility, Columbia Sportswear is 1.09 times less risky than Carters. It trades about 0.08 of its potential returns per unit of risk. Carters is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  6,677  in Carters on December 29, 2023 and sell it today you would earn a total of  1,637  from holding Carters or generate 24.52% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Columbia Sportswear  vs.  Carters

 Performance 
       Timeline  
Columbia Sportswear 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days Columbia Sportswear has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy essential indicators, Columbia Sportswear is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.
Carters 

Risk-Adjusted Performance

10 of 100

 
Low
 
High
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Carters are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain basic indicators, Carters may actually be approaching a critical reversion point that can send shares even higher in April 2024.

Columbia Sportswear and Carters Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Columbia Sportswear and Carters

The main advantage of trading using opposite Columbia Sportswear and Carters positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Columbia Sportswear 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 Columbia Sportswear 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.
Check out your portfolio center.
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.

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