Correlation Between Cato and Bebe Stores

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

By analyzing existing cross correlation between Cato Corporation and bebe stores inc, you can compare the effects of market volatilities on Cato and Bebe Stores 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 Cato with a short position of Bebe Stores. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cato and Bebe Stores.

Diversification Opportunities for Cato and Bebe Stores

0.74

Correlation Coefficient

Cato  Bebe Stores

Poor diversification

The 3 months correlation between Cato and Bebe is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Cato Corp. and bebe stores inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on bebe stores inc and Cato 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 Cato Corporation are associated (or correlated) with Bebe Stores. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of bebe stores inc has no effect on the direction of Cato i.e., Cato and Bebe Stores go up and down completely randomly.

Pair Corralation between Cato and Bebe Stores

If you would invest  510.00  in Cato Corporation on February 20, 2024 and sell it today you would earn a total of  21.00  from holding Cato Corporation or generate 4.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	4.76%
Values	Daily Returns

Cato Corp.  vs.  bebe stores inc

Cato

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cato Corporation has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in June 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

bebe stores inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days bebe stores inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental drivers, Bebe Stores is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Cato and Bebe Stores

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

The idea behind Cato Corporation and bebe stores inc 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.