Correlation Between Zumiez and Continental

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

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

Diversification Opportunities for Zumiez and Continental

-0.39

Correlation Coefficient

Zumiez  Continental

Very good diversification

The 3 months correlation between Zumiez and Continental is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Zumiez Inc and Caleres in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Continental and Zumiez 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 Zumiez Inc are associated (or correlated) with Continental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Continental has no effect on the direction of Zumiez i.e., Zumiez and Continental go up and down completely randomly.

Pair Corralation between Zumiez and Continental

Given the investment horizon of 90 days Zumiez Inc is expected to generate 1.38 times more return on investment than Continental. However, Zumiez is 1.38 times more volatile than Caleres. It trades about 0.31 of its potential returns per unit of risk. Caleres is currently generating about -0.06 per unit of risk. If you would invest  1,433  in Zumiez Inc on February 3, 2024 and sell it today you would earn a total of  279.00  from holding Zumiez Inc or generate 19.47% return on investment over 90 days.

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

Zumiez Inc  vs.  Caleres

Zumiez Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zumiez Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong primary indicators, Zumiez is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Continental

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Caleres are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating basic indicators, Continental disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Zumiez and Continental

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

The idea behind Zumiez Inc and Caleres 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.