Correlation Between Build A and Guess
Can any of the company-specific risk be diversified away by investing in both Build A and Guess 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 Guess 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 Guess Inc, you can compare the effects of market volatilities on Build A and Guess 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 Guess. Check out your portfolio center. Please also check ongoing floating volatility patterns of Build A and Guess.
Diversification Opportunities for Build A and Guess
Pay attention - limited upside
The 3 months correlation between Build and Guess is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Build A Bear Workshop and Guess Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guess Inc 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 Guess. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guess Inc has no effect on the direction of Build A i.e., Build A and Guess go up and down completely randomly.
Pair Corralation between Build A and Guess
Considering the 90-day investment horizon Build A Bear Workshop is expected to generate 1.34 times more return on investment than Guess. However, Build A is 1.34 times more volatile than Guess Inc. It trades about 0.2 of its potential returns per unit of risk. Guess Inc is currently generating about -0.12 per unit of risk. If you would invest 3,085 in Build A Bear Workshop on August 26, 2024 and sell it today you would earn a total of 734.00 from holding Build A Bear Workshop or generate 23.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Build A Bear Workshop vs. Guess Inc
Performance |
| Timeline |
| Build A Bear |
| Guess Inc |
Build A and Guess Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Build A and Guess
The main advantage of trading using opposite Build A and Guess positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Build A position performs unexpectedly, Guess 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 Guess will offset losses from the drop in Guess' long position.The idea behind Build A Bear Workshop and Guess Inc 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.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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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