Correlation Between Big 5 and National Vision
Can any of the company-specific risk be diversified away by investing in both Big 5 and National Vision 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 National Vision 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 National Vision Holdings, you can compare the effects of market volatilities on Big 5 and National Vision 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 National Vision. Check out your portfolio center. Please also check ongoing floating volatility patterns of Big 5 and National Vision.
Diversification Opportunities for Big 5 and National Vision
-0.51 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Big and National is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Big 5 Sporting and National Vision Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Vision Holdings 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 National Vision. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Vision Holdings has no effect on the direction of Big 5 i.e., Big 5 and National Vision go up and down completely randomly.
Pair Corralation between Big 5 and National Vision
Given the investment horizon of 90 days Big 5 Sporting is expected to under-perform the National Vision. In addition to that, Big 5 is 1.06 times more volatile than National Vision Holdings. It trades about -0.08 of its total potential returns per unit of risk. National Vision Holdings is currently generating about -0.05 per unit of volatility. If you would invest 3,910 in National Vision Holdings on August 27, 2024 and sell it today you would lose (2,744) from holding National Vision Holdings or give up 70.18% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Big 5 Sporting vs. National Vision Holdings
Performance |
| Timeline |
| Big 5 Sporting |
| National Vision Holdings |
Big 5 and National Vision Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Big 5 and National Vision
The main advantage of trading using opposite Big 5 and National Vision positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Big 5 position performs unexpectedly, National Vision 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 National Vision will offset losses from the drop in National Vision's long position.The idea behind Big 5 Sporting and National Vision 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.| National Vision vs. Sally Beauty Holdings | National Vision vs. MarineMax | National Vision vs. Sportsmans | National Vision vs. 1 800 FLOWERSCOM |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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