Correlation Between City Of and Big 5
Can any of the company-specific risk be diversified away by investing in both City Of and Big 5 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 City Of and Big 5 into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The City of and Big 5 Sporting, you can compare the effects of market volatilities on City Of and Big 5 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 City Of with a short position of Big 5. Check out your portfolio center. Please also check ongoing floating volatility patterns of City Of and Big 5.
Diversification Opportunities for City Of and Big 5
Modest diversification
The 3 months correlation between City and Big is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding The City of and Big 5 Sporting in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Big 5 Sporting and City Of 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 The City of are associated (or correlated) with Big 5. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Big 5 Sporting has no effect on the direction of City Of i.e., City Of and Big 5 go up and down completely randomly.
Pair Corralation between City Of and Big 5
Assuming the 90 days horizon The City of is expected to generate 0.35 times more return on investment than Big 5. However, The City of is 2.87 times less risky than Big 5. It trades about 0.04 of its potential returns per unit of risk. Big 5 Sporting is currently generating about -0.06 per unit of risk. If you would invest 424.00 in The City of on September 3, 2024 and sell it today you would earn a total of 96.00 from holding The City of or generate 22.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
The City of vs. Big 5 Sporting
Performance |
| Timeline |
| The City |
| Big 5 Sporting |
City Of and Big 5 Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with City Of and Big 5
The main advantage of trading using opposite City Of and Big 5 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if City Of position performs unexpectedly, Big 5 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 Big 5 will offset losses from the drop in Big 5's long position.The idea behind The City of and Big 5 Sporting 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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