Correlation Between Shoe Carnival and ZhongAn Online

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

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

Diversification Opportunities for Shoe Carnival and ZhongAn Online

-0.14

Correlation Coefficient

Shoe Carnival  ZhongAn Online

Good diversification

The 3 months correlation between Shoe and ZhongAn is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Shoe Carnival and ZhongAn Online P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ZhongAn Online P and Shoe Carnival 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 Shoe Carnival are associated (or correlated) with ZhongAn Online. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ZhongAn Online P has no effect on the direction of Shoe Carnival i.e., Shoe Carnival and ZhongAn Online go up and down completely randomly.

Pair Corralation between Shoe Carnival and ZhongAn Online

Given the investment horizon of 90 days Shoe Carnival is expected to generate 0.62 times more return on investment than ZhongAn Online. However, Shoe Carnival is 1.61 times less risky than ZhongAn Online. It trades about 0.0 of its potential returns per unit of risk. ZhongAn Online P is currently generating about -0.21 per unit of risk. If you would invest  3,471  in Shoe Carnival on February 5, 2024 and sell it today you would lose (11.00) from holding Shoe Carnival or give up 0.32% of portfolio value over 90 days.

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

Shoe Carnival  vs.  ZhongAn Online P

Shoe Carnival

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Shoe Carnival are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Shoe Carnival disclosed solid returns over the last few months and may actually be approaching a breakup point.

ZhongAn Online P

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ZhongAn Online P has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in June 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Shoe Carnival and ZhongAn Online

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

The idea behind Shoe Carnival and ZhongAn Online P 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.