Correlation Between Childrens Place and EQUITABLE

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

By analyzing existing cross correlation between Childrens Place and EQUITABLE INC 7, you can compare the effects of market volatilities on Childrens Place and EQUITABLE 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 Childrens Place with a short position of EQUITABLE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Childrens Place and EQUITABLE.

Diversification Opportunities for Childrens Place and EQUITABLE

0.45

Correlation Coefficient

Childrens Place  EQUITABLE

Very weak diversification

The 3 months correlation between Childrens and EQUITABLE is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Childrens Place and EQUITABLE INC 7 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EQUITABLE INC 7 and Childrens Place 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 Childrens Place are associated (or correlated) with EQUITABLE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EQUITABLE INC 7 has no effect on the direction of Childrens Place i.e., Childrens Place and EQUITABLE go up and down completely randomly.

Pair Corralation between Childrens Place and EQUITABLE

Given the investment horizon of 90 days Childrens Place is expected to generate 26.02 times more return on investment than EQUITABLE. However, Childrens Place is 26.02 times more volatile than EQUITABLE INC 7. It trades about 0.21 of its potential returns per unit of risk. EQUITABLE INC 7 is currently generating about -0.13 per unit of risk. If you would invest  486.00  in Childrens Place on August 10, 2024 and sell it today you would earn a total of  899.00  from holding Childrens Place or generate 184.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	86.36%
Values	Daily Returns

Childrens Place  vs.  EQUITABLE INC 7

Childrens Place

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Childrens Place are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain fundamental indicators, Childrens Place exhibited solid returns over the last few months and may actually be approaching a breakup point.

EQUITABLE INC 7

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EQUITABLE INC 7 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, EQUITABLE is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Childrens Place and EQUITABLE

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

The idea behind Childrens Place and EQUITABLE INC 7 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.