Correlation Between Shoe Carnival and Cato

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

By analyzing existing cross correlation between Shoe Carnival and Cato Corporation, you can compare the effects of market volatilities on Shoe Carnival and Cato 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 Cato. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shoe Carnival and Cato.

Diversification Opportunities for Shoe Carnival and Cato

0.75

Correlation Coefficient

Shoe Carnival  Cato

Poor diversification

The 3 months correlation between Shoe and Cato is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Shoe Carnival and Cato Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cato 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 Cato. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cato has no effect on the direction of Shoe Carnival i.e., Shoe Carnival and Cato go up and down completely randomly.

Pair Corralation between Shoe Carnival and Cato

Given the investment horizon of 90 days Shoe Carnival is expected to generate 1.65 times less return on investment than Cato. But when comparing it to its historical volatility, Shoe Carnival is 1.63 times less risky than Cato. It trades about 0.08 of its potential returns per unit of risk. Cato Corporation is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  231.00  in Cato Corporation on May 5, 2025 and sell it today you would earn a total of  48.00  from holding Cato Corporation or generate 20.78% return on investment over 90 days.

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

Shoe Carnival  vs.  Cato Corp.

Shoe Carnival

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Shoe Carnival are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating basic indicators, Shoe Carnival disclosed solid returns over the last few months and may actually be approaching a breakup point.

Cato

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Cato Corporation are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Cato displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shoe Carnival and Cato

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

The idea behind Shoe Carnival and Cato Corporation 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.