Correlation Between Big 5 and Tillys
Can any of the company-specific risk be diversified away by investing in both Big 5 and Tillys 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 Tillys 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 Tillys Inc, you can compare the effects of market volatilities on Big 5 and Tillys 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 Tillys. Check out your portfolio center. Please also check ongoing floating volatility patterns of Big 5 and Tillys.
Diversification Opportunities for Big 5 and Tillys
Very weak diversification
The 3 months correlation between Big and Tillys is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Big 5 Sporting and Tillys Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tillys Inc 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 Tillys. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tillys Inc has no effect on the direction of Big 5 i.e., Big 5 and Tillys go up and down completely randomly.
Pair Corralation between Big 5 and Tillys
Given the investment horizon of 90 days Big 5 Sporting is expected to under-perform the Tillys. In addition to that, Big 5 is 1.27 times more volatile than Tillys Inc. It trades about -0.07 of its total potential returns per unit of risk. Tillys Inc is currently generating about -0.04 per unit of volatility. If you would invest 773.00 in Tillys Inc on August 29, 2024 and sell it today you would lose (355.00) from holding Tillys Inc or give up 45.92% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Big 5 Sporting vs. Tillys Inc
Performance |
| Timeline |
| Big 5 Sporting |
| Tillys Inc |
Big 5 and Tillys Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Big 5 and Tillys
The main advantage of trading using opposite Big 5 and Tillys positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Big 5 position performs unexpectedly, Tillys 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 Tillys will offset losses from the drop in Tillys' long position.The idea behind Big 5 Sporting and Tillys Inc 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.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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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