Correlation Between Best Buy and Card Factory
Can any of the company-specific risk be diversified away by investing in both Best Buy and Card Factory 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 Best Buy and Card Factory into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Best Buy Co and Card Factory plc, you can compare the effects of market volatilities on Best Buy and Card Factory 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 Best Buy with a short position of Card Factory. Check out your portfolio center. Please also check ongoing floating volatility patterns of Best Buy and Card Factory.
Diversification Opportunities for Best Buy and Card Factory
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Best and Card is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Best Buy Co and Card Factory plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Card Factory plc and Best Buy 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 Best Buy Co are associated (or correlated) with Card Factory. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Card Factory plc has no effect on the direction of Best Buy i.e., Best Buy and Card Factory go up and down completely randomly.
Pair Corralation between Best Buy and Card Factory
Considering the 90-day investment horizon Best Buy is expected to generate 32.39 times less return on investment than Card Factory. But when comparing it to its historical volatility, Best Buy Co is 26.84 times less risky than Card Factory. It trades about 0.04 of its potential returns per unit of risk. Card Factory plc is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 2.26 in Card Factory plc on August 31, 2024 and sell it today you would earn a total of 115.74 from holding Card Factory plc or generate 5121.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.73% |
| Values | Daily Returns |
Best Buy Co vs. Card Factory plc
Performance |
| Timeline |
| Best Buy |
| Card Factory plc |
Best Buy and Card Factory Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Best Buy and Card Factory
The main advantage of trading using opposite Best Buy and Card Factory positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Best Buy position performs unexpectedly, Card Factory 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 Card Factory will offset losses from the drop in Card Factory's long position.The idea behind Best Buy Co and Card Factory plc 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.| Card Factory vs. Ulta Beauty | Card Factory vs. Williams Sonoma | Card Factory vs. Dicks Sporting Goods | Card Factory vs. Best Buy Co |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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