Correlation Between Big 5 and DICKER DATA
Can any of the company-specific risk be diversified away by investing in both Big 5 and DICKER DATA 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 Big 5 and DICKER DATA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Big 5 Sporting and DICKER DATA LTD, you can compare the effects of market volatilities on Big 5 and DICKER DATA 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 Big 5 with a short position of DICKER DATA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Big 5 and DICKER DATA.
Diversification Opportunities for Big 5 and DICKER DATA
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Big and DICKER is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Big 5 Sporting and DICKER DATA LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DICKER DATA LTD and Big 5 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 Big 5 Sporting are associated (or correlated) with DICKER DATA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DICKER DATA LTD has no effect on the direction of Big 5 i.e., Big 5 and DICKER DATA go up and down completely randomly.
Pair Corralation between Big 5 and DICKER DATA
Assuming the 90 days horizon Big 5 Sporting is expected to generate 2.4 times more return on investment than DICKER DATA. However, Big 5 is 2.4 times more volatile than DICKER DATA LTD. It trades about 0.02 of its potential returns per unit of risk. DICKER DATA LTD is currently generating about -0.04 per unit of risk. If you would invest 159.00 in Big 5 Sporting on September 3, 2024 and sell it today you would lose (2.00) from holding Big 5 Sporting or give up 1.26% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Big 5 Sporting vs. DICKER DATA LTD
Performance |
| Timeline |
| Big 5 Sporting |
| DICKER DATA LTD |
Big 5 and DICKER DATA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Big 5 and DICKER DATA
The main advantage of trading using opposite Big 5 and DICKER DATA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Big 5 position performs unexpectedly, DICKER DATA 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 DICKER DATA will offset losses from the drop in DICKER DATA's long position.The idea behind Big 5 Sporting and DICKER DATA LTD 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.| DICKER DATA vs. Arrow Electronics | DICKER DATA vs. KAGA EL LTD | DICKER DATA vs. Wayside Technology Group | DICKER DATA vs. INNELEC MULTIMMINHEO153 |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
Other Complementary Tools
| Portfolio Center All portfolio management and optimization tools to improve performance of your portfolios | |
| Money Flow Index Determine momentum by analyzing Money Flow Index and other technical indicators | |
| Equity Valuation Check real value of public entities based on technical and fundamental data | |
| Positions Ratings Determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Portfolio Comparator Compare the composition, asset allocations and performance of any two portfolios in your account |