Correlation Between Tillys and Cato

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

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

Diversification Opportunities for Tillys and Cato

0.28

Correlation Coefficient

Tillys  Cato

Modest diversification

The 3 months correlation between Tillys and Cato is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Tillys Inc and Cato Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cato and Tillys 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 Tillys Inc 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 Tillys i.e., Tillys and Cato go up and down completely randomly.

Pair Corralation between Tillys and Cato

Given the investment horizon of 90 days Tillys Inc is expected to generate 1.91 times more return on investment than Cato. However, Tillys is 1.91 times more volatile than Cato Corporation. It trades about 0.08 of its potential returns per unit of risk. Cato Corporation is currently generating about 0.09 per unit of risk. If you would invest  136.00  in Tillys Inc on May 5, 2025 and sell it today you would earn a total of  34.00  from holding Tillys Inc or generate 25.0% return on investment over 90 days.

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

Tillys Inc  vs.  Cato Corp.

Tillys Inc

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Tillys Inc are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Tillys unveiled 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 Tillys and Cato

The main advantage of trading using opposite Tillys and Cato positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tillys 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 Tillys Inc 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.