Correlation Between Best Buy and Victorias Secret
Can any of the company-specific risk be diversified away by investing in both Best Buy and Victorias Secret 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 Victorias Secret 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 Victorias Secret Co, you can compare the effects of market volatilities on Best Buy and Victorias Secret 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 Victorias Secret. Check out your portfolio center. Please also check ongoing floating volatility patterns of Best Buy and Victorias Secret.
Diversification Opportunities for Best Buy and Victorias Secret
-0.61 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Best and Victorias is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Best Buy Co and Victorias Secret Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Victorias Secret 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 Victorias Secret. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Victorias Secret has no effect on the direction of Best Buy i.e., Best Buy and Victorias Secret go up and down completely randomly.
Pair Corralation between Best Buy and Victorias Secret
Considering the 90-day investment horizon Best Buy Co is expected to generate 0.48 times more return on investment than Victorias Secret. However, Best Buy Co is 2.08 times less risky than Victorias Secret. It trades about 0.03 of its potential returns per unit of risk. Victorias Secret Co is currently generating about 0.01 per unit of risk. If you would invest 7,692 in Best Buy Co on August 26, 2024 and sell it today you would earn a total of 1,262 from holding Best Buy Co or generate 16.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Best Buy Co vs. Victorias Secret Co
Performance |
| Timeline |
| Best Buy |
| Victorias Secret |
Best Buy and Victorias Secret Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Best Buy and Victorias Secret
The main advantage of trading using opposite Best Buy and Victorias Secret positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Best Buy position performs unexpectedly, Victorias Secret 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 Victorias Secret will offset losses from the drop in Victorias Secret's long position.| Best Buy vs. Target | Best Buy vs. Lowes Companies | Best Buy vs. Walmart | Best Buy vs. Aquagold International |
| Victorias Secret vs. Ross Stores | Victorias Secret vs. Childrens Place | Victorias Secret vs. Buckle Inc | Victorias Secret vs. Guess Inc |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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