Correlation Between Continental and Barnes Noble

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

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

Diversification Opportunities for Continental and Barnes Noble

-0.18

Correlation Coefficient

Continental  Barnes Noble

Good diversification

The 3 months correlation between Continental and Barnes is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Caleres and Barnes Noble Education in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Barnes Noble Education and Continental 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 Caleres are associated (or correlated) with Barnes Noble. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Barnes Noble Education has no effect on the direction of Continental i.e., Continental and Barnes Noble go up and down completely randomly.

Pair Corralation between Continental and Barnes Noble

Considering the 90-day investment horizon Caleres is expected to generate 0.14 times more return on investment than Barnes Noble. However, Caleres is 6.93 times less risky than Barnes Noble. It trades about -0.18 of its potential returns per unit of risk. Barnes Noble Education is currently generating about -0.24 per unit of risk. If you would invest  4,014  in Caleres on February 1, 2024 and sell it today you would lose (331.00) from holding Caleres or give up 8.25% of portfolio value over 90 days.

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

Caleres  vs.  Barnes Noble Education

Continental

Risk-Adjusted Performance

8 of 100

Good

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 weak basic indicators, Continental disclosed solid returns over the last few months and may actually be approaching a breakup point.

Barnes Noble Education

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Barnes Noble Education has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in June 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Continental and Barnes Noble

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

The idea behind Caleres and Barnes Noble Education 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.