Correlation Between Columbia Sportswear and Carters
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 Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Columbia Sportswear vs. Carters
Performance |
Timeline |
Columbia Sportswear |
Carters |
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.Columbia Sportswear vs. Malibu Boats | Columbia Sportswear vs. MCBC Holdings | Columbia Sportswear vs. Brunswick | Columbia Sportswear vs. BRP Inc |
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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