Correlation Between Fossil and Continental

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

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

Diversification Opportunities for Fossil and Continental

-0.48

Correlation Coefficient

Fossil  Continental

Very good diversification

The 3 months correlation between Fossil and Continental is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Fossil Group and Caleres in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Continental and Fossil 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 Fossil Group 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 Fossil i.e., Fossil and Continental go up and down completely randomly.

Pair Corralation between Fossil and Continental

Given the investment horizon of 90 days Fossil Group is expected to under-perform the Continental. In addition to that, Fossil is 1.87 times more volatile than Caleres. It trades about -0.29 of its total potential returns per unit of risk. Caleres is currently generating about -0.23 per unit of volatility. If you would invest  4,103  in Caleres on January 28, 2024 and sell it today you would lose (409.00) from holding Caleres or give up 9.97% of portfolio value over 90 days.

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

Fossil Group  vs.  Caleres

Fossil Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fossil Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite abnormal performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in May 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Continental

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Caleres are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Continental disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fossil and Continental

The main advantage of trading using opposite Fossil and Continental positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fossil 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 Fossil Group 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.

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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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.