Correlation Between Big 5 and PetMed Express
Can any of the company-specific risk be diversified away by investing in both Big 5 and PetMed Express 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 PetMed Express 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 PetMed Express, you can compare the effects of market volatilities on Big 5 and PetMed Express 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 PetMed Express. Check out your portfolio center. Please also check ongoing floating volatility patterns of Big 5 and PetMed Express.
Diversification Opportunities for Big 5 and PetMed Express
-0.39 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Big and PetMed is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Big 5 Sporting and PetMed Express in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PetMed Express 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 PetMed Express. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PetMed Express has no effect on the direction of Big 5 i.e., Big 5 and PetMed Express go up and down completely randomly.
Pair Corralation between Big 5 and PetMed Express
Given the investment horizon of 90 days Big 5 Sporting is expected to under-perform the PetMed Express. But the stock apears to be less risky and, when comparing its historical volatility, Big 5 Sporting is 1.9 times less risky than PetMed Express. The stock trades about -0.21 of its potential returns per unit of risk. The PetMed Express is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 410.00 in PetMed Express on August 23, 2024 and sell it today you would earn a total of 54.00 from holding PetMed Express or generate 13.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Big 5 Sporting vs. PetMed Express
Performance |
| Timeline |
| Big 5 Sporting |
| PetMed Express |
Big 5 and PetMed Express Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Big 5 and PetMed Express
The main advantage of trading using opposite Big 5 and PetMed Express positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Big 5 position performs unexpectedly, PetMed Express 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 PetMed Express will offset losses from the drop in PetMed Express' long position.The idea behind Big 5 Sporting and PetMed Express 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.| PetMed Express vs. High Tide | PetMed Express vs. China Jo Jo Drugstores | PetMed Express vs. Walgreens Boots Alliance | PetMed Express vs. 111 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
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