Correlation Between Big 5 and Sportsmans
Can any of the company-specific risk be diversified away by investing in both Big 5 and Sportsmans 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 Sportsmans 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 Sportsmans, you can compare the effects of market volatilities on Big 5 and Sportsmans 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 Sportsmans. Check out your portfolio center. Please also check ongoing floating volatility patterns of Big 5 and Sportsmans.
Diversification Opportunities for Big 5 and Sportsmans
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Big and Sportsmans is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Big 5 Sporting and Sportsmans in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sportsmans 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 Sportsmans. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sportsmans has no effect on the direction of Big 5 i.e., Big 5 and Sportsmans go up and down completely randomly.
Pair Corralation between Big 5 and Sportsmans
Given the investment horizon of 90 days Big 5 Sporting is expected to under-perform the Sportsmans. In addition to that, Big 5 is 1.02 times more volatile than Sportsmans. It trades about -0.09 of its total potential returns per unit of risk. Sportsmans is currently generating about -0.06 per unit of volatility. If you would invest 343.00 in Sportsmans on August 24, 2024 and sell it today you would lose (139.00) from holding Sportsmans or give up 40.52% 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. Sportsmans
Performance |
| Timeline |
| Big 5 Sporting |
| Sportsmans |
Big 5 and Sportsmans Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Big 5 and Sportsmans
The main advantage of trading using opposite Big 5 and Sportsmans positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Big 5 position performs unexpectedly, Sportsmans 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 Sportsmans will offset losses from the drop in Sportsmans' long position.The idea behind Big 5 Sporting and Sportsmans 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.| Sportsmans vs. MarineMax | Sportsmans vs. Build A Bear Workshop | Sportsmans vs. Leslies | Sportsmans vs. Sally Beauty Holdings |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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