Correlation Between Foot Locker and Continental

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

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

Diversification Opportunities for Foot Locker and Continental

-0.38

Correlation Coefficient

Foot Locker  Continental

Very good diversification

The 3 months correlation between Foot and Continental is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Foot Locker and Caleres in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Continental and Foot Locker 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 Foot Locker 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 Foot Locker i.e., Foot Locker and Continental go up and down completely randomly.

Pair Corralation between Foot Locker and Continental

Allowing for the 90-day total investment horizon Foot Locker is expected to generate 2.31 times more return on investment than Continental. However, Foot Locker is 2.31 times more volatile than Caleres. It trades about 0.15 of its potential returns per unit of risk. Caleres is currently generating about 0.0 per unit of risk. If you would invest  1,186  in Foot Locker on May 7, 2025 and sell it today you would earn a total of  1,291  from holding Foot Locker or generate 108.85% return on investment over 90 days.

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

Foot Locker  vs.  Caleres

Foot Locker

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Foot Locker are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating essential indicators, Foot Locker disclosed solid returns over the last few months and may actually be approaching a breakup point.

Continental

Risk-Adjusted Performance

Weak

Over the last 90 days Caleres has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Continental is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Foot Locker and Continental

The main advantage of trading using opposite Foot Locker and Continental positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Foot Locker 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 Foot Locker 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.