Correlation Between Lands End and Shoe Carnival

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

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

Diversification Opportunities for Lands End and Shoe Carnival

0.46

Correlation Coefficient

Lands End  Shoe Carnival

Very weak diversification

The 3 months correlation between Lands and Shoe is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Lands End and Shoe Carnival in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shoe Carnival and Lands End 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 Lands End are associated (or correlated) with Shoe Carnival. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shoe Carnival has no effect on the direction of Lands End i.e., Lands End and Shoe Carnival go up and down completely randomly.

Pair Corralation between Lands End and Shoe Carnival

Allowing for the 90-day total investment horizon Lands End is expected to generate 2.15 times more return on investment than Shoe Carnival. However, Lands End is 2.15 times more volatile than Shoe Carnival. It trades about 0.16 of its potential returns per unit of risk. Shoe Carnival is currently generating about -0.17 per unit of risk. If you would invest  1,198  in Lands End on February 2, 2024 and sell it today you would earn a total of  159.00  from holding Lands End or generate 13.27% return on investment over 90 days.

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

Lands End  vs.  Shoe Carnival

Lands End

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Lands End are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Lands End exhibited solid returns over the last few months and may actually be approaching a breakup point.

Shoe Carnival

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Shoe Carnival are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Shoe Carnival disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lands End and Shoe Carnival

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

The idea behind Lands End and Shoe Carnival 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.