Correlation Between Build A and Dillards
Can any of the company-specific risk be diversified away by investing in both Build A and Dillards 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 Build A and Dillards into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Build A Bear Workshop and Dillards, you can compare the effects of market volatilities on Build A and Dillards 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 Build A with a short position of Dillards. Check out your portfolio center. Please also check ongoing floating volatility patterns of Build A and Dillards.
Diversification Opportunities for Build A and Dillards
Poor diversification
The 3 months correlation between Build and Dillards is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Build A Bear Workshop and Dillards in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dillards and Build A 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 Build A Bear Workshop are associated (or correlated) with Dillards. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dillards has no effect on the direction of Build A i.e., Build A and Dillards go up and down completely randomly.
Pair Corralation between Build A and Dillards
Considering the 90-day investment horizon Build A is expected to generate 1.37 times less return on investment than Dillards. But when comparing it to its historical volatility, Build A Bear Workshop is 1.07 times less risky than Dillards. It trades about 0.11 of its potential returns per unit of risk. Dillards is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 38,369 in Dillards on August 30, 2024 and sell it today you would earn a total of 6,372 from holding Dillards or generate 16.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Build A Bear Workshop vs. Dillards
Performance |
| Timeline |
| Build A Bear |
| Dillards |
Build A and Dillards Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Build A and Dillards
The main advantage of trading using opposite Build A and Dillards positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Build A position performs unexpectedly, Dillards 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 Dillards will offset losses from the drop in Dillards' long position.The idea behind Build A Bear Workshop and Dillards 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.| Dillards vs. Macys Inc | Dillards vs. Kohls Corp | Dillards vs. Marks Spencer Group | Dillards vs. Marks and Spencer |
Check out your portfolio center.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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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