Correlation Between Build A and Leslies
Can any of the company-specific risk be diversified away by investing in both Build A and Leslies 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 Leslies 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 Leslies, you can compare the effects of market volatilities on Build A and Leslies 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 Leslies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Build A and Leslies.
Diversification Opportunities for Build A and Leslies
Significant diversification
The 3 months correlation between Build and Leslies is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Build A Bear Workshop and Leslies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leslies 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 Leslies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Leslies has no effect on the direction of Build A i.e., Build A and Leslies go up and down completely randomly.
Pair Corralation between Build A and Leslies
Considering the 90-day investment horizon Build A Bear Workshop is expected to generate 0.4 times more return on investment than Leslies. However, Build A Bear Workshop is 2.52 times less risky than Leslies. It trades about 0.11 of its potential returns per unit of risk. Leslies is currently generating about -0.06 per unit of risk. If you would invest 2,723 in Build A Bear Workshop on August 30, 2024 and sell it today you would earn a total of 1,091 from holding Build A Bear Workshop or generate 40.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Build A Bear Workshop vs. Leslies
Performance |
| Timeline |
| Build A Bear |
| Leslies |
Build A and Leslies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Build A and Leslies
The main advantage of trading using opposite Build A and Leslies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Build A position performs unexpectedly, Leslies 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 Leslies will offset losses from the drop in Leslies' long position.The idea behind Build A Bear Workshop and Leslies 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.| Leslies vs. Sally Beauty Holdings | Leslies vs. ODP Corp | Leslies vs. 1 800 FLOWERSCOM | Leslies vs. Caseys General Stores |
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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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