Correlation Between Retailors and Castro

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

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

Diversification Opportunities for Retailors and Castro

0.47

Correlation Coefficient

Retailors  Castro

Very weak diversification

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

Pair Corralation between Retailors and Castro

Assuming the 90 days trading horizon Retailors is expected to generate 1.91 times more return on investment than Castro. However, Retailors is 1.91 times more volatile than Castro. It trades about -0.04 of its potential returns per unit of risk. Castro is currently generating about -0.12 per unit of risk. 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

Retailors  vs.  Castro

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.

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.

Pair Trading with Retailors and Castro

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

The idea behind Retailors and Castro 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.