Correlation Between Carters and Abercrombie Fitch

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

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

Diversification Opportunities for Carters and Abercrombie Fitch

0.58
  Correlation Coefficient
Carters
Abercrombie Fitch

Very weak diversification

The 1 month correlation between Carters and Abercrombie is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Carters and Abercrombie Fitch in the same portfolio assuming nothing else is changed. The correlation between historical prices or returns on Abercrombie Fitch and Carters 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 Carters are associated (or correlated) with Abercrombie Fitch. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Abercrombie Fitch has no effect on the direction of Carters i.e., Carters and Abercrombie Fitch go up and down completely randomly.

Pair Corralation between Carters and Abercrombie Fitch

Considering the 90-day investment horizon Carters is expected to under-perform the Abercrombie Fitch. But the stock apears to be less risky and, when comparing its historical volatility, Carters is 1.92 times less risky than Abercrombie Fitch. The stock trades about -0.04 of its potential returns per unit of risk. The Abercrombie Fitch is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  3,764  in Abercrombie Fitch on June 23, 2021 and sell it today you would earn a total of  6.00  from holding Abercrombie Fitch or generate 0.16% return on investment over 90 days.
Time Period1 Month [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Carters  vs.  Abercrombie Fitch

 Performance (%) 
      Timeline 
Carters 
 Carters Performance
0 of 100
Over the last 90 days Carters has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in October 2021. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Carters Price Channel

Abercrombie Fitch 
 Abercrombie Performance
0 of 100
Over the last 90 days Abercrombie Fitch has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Abercrombie Fitch is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Abercrombie Price Channel

Carters and Abercrombie Fitch Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with Carters and Abercrombie Fitch

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

Abercrombie Fitch

Pair trading matchups for Abercrombie Fitch

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.

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