Correlation Between Castro and Retailors

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

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

Diversification Opportunities for Castro and Retailors

0.47

Correlation Coefficient

Castro  Retailors

Very weak diversification

The 3 months correlation between Castro and Retailors is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Castro and Retailors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Retailors and Castro 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 Castro are associated (or correlated) with Retailors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Retailors has no effect on the direction of Castro i.e., Castro and Retailors go up and down completely randomly.

Pair Corralation between Castro and Retailors

Assuming the 90 days trading horizon Castro is expected to under-perform the Retailors. But the stock apears to be less risky and, when comparing its historical volatility, Castro is 1.91 times less risky than Retailors. The stock trades about -0.12 of its potential returns per unit of risk. The Retailors is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  765,400  in Retailors on April 24, 2025 and sell it today you would lose (95,200) from holding Retailors or give up 12.44% of portfolio value over 90 days.

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

Castro  vs.  Retailors

Castro

Risk-Adjusted Performance

Very Weak

Over the last 90 days Castro has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in August 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Retailors

Risk-Adjusted Performance

Very Weak

Over the last 90 days Retailors has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Castro and Retailors

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

The idea behind Castro and Retailors 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.