Correlation Between Big 5 and Transport International
Can any of the company-specific risk be diversified away by investing in both Big 5 and Transport International 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 Transport International 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 Transport International Holdings, you can compare the effects of market volatilities on Big 5 and Transport International 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 Transport International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Big 5 and Transport International.
Diversification Opportunities for Big 5 and Transport International
0.27 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Big and Transport is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Big 5 Sporting and Transport International Holdin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transport International 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 Transport International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transport International has no effect on the direction of Big 5 i.e., Big 5 and Transport International go up and down completely randomly.
Pair Corralation between Big 5 and Transport International
Assuming the 90 days horizon Big 5 Sporting is expected to under-perform the Transport International. But the stock apears to be less risky and, when comparing its historical volatility, Big 5 Sporting is 1.27 times less risky than Transport International. The stock trades about -0.07 of its potential returns per unit of risk. The Transport International Holdings is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 26.00 in Transport International Holdings on August 26, 2024 and sell it today you would earn a total of 69.00 from holding Transport International Holdings or generate 265.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Big 5 Sporting vs. Transport International Holdin
Performance |
| Timeline |
| Big 5 Sporting |
| Transport International |
Big 5 and Transport International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Big 5 and Transport International
The main advantage of trading using opposite Big 5 and Transport International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Big 5 position performs unexpectedly, Transport International 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 Transport International will offset losses from the drop in Transport International's long position.The idea behind Big 5 Sporting and Transport International Holdings 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.| Transport International vs. Westinghouse Air Brake | Transport International vs. Superior Plus Corp | Transport International vs. NMI Holdings | Transport International vs. Origin Agritech |
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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