Correlation Between Dairy Farm and DICKS Sporting
Can any of the company-specific risk be diversified away by investing in both Dairy Farm and DICKS Sporting 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 Dairy Farm and DICKS Sporting into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dairy Farm International and DICKS Sporting Goods, you can compare the effects of market volatilities on Dairy Farm and DICKS Sporting 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 Dairy Farm with a short position of DICKS Sporting. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dairy Farm and DICKS Sporting.
Diversification Opportunities for Dairy Farm and DICKS Sporting
-0.05 | Correlation Coefficient |
Good diversification
The 3 months correlation between Dairy and DICKS is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Dairy Farm International and DICKS Sporting Goods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DICKS Sporting Goods and Dairy Farm 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 Dairy Farm International are associated (or correlated) with DICKS Sporting. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DICKS Sporting Goods has no effect on the direction of Dairy Farm i.e., Dairy Farm and DICKS Sporting go up and down completely randomly.
Pair Corralation between Dairy Farm and DICKS Sporting
Assuming the 90 days trading horizon Dairy Farm International is expected to under-perform the DICKS Sporting. But the stock apears to be less risky and, when comparing its historical volatility, Dairy Farm International is 1.25 times less risky than DICKS Sporting. The stock trades about -0.06 of its potential returns per unit of risk. The DICKS Sporting Goods is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 22,295 in DICKS Sporting Goods on October 25, 2024 and sell it today you would lose (20.00) from holding DICKS Sporting Goods or give up 0.09% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dairy Farm International vs. DICKS Sporting Goods
Performance |
| Timeline |
| Dairy Farm International |
| DICKS Sporting Goods |
Dairy Farm and DICKS Sporting Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dairy Farm and DICKS Sporting
The main advantage of trading using opposite Dairy Farm and DICKS Sporting positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dairy Farm position performs unexpectedly, DICKS Sporting 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 DICKS Sporting will offset losses from the drop in DICKS Sporting's long position.| Dairy Farm vs. Highlight Communications AG | Dairy Farm vs. Entravision Communications | Dairy Farm vs. Charter Communications | Dairy Farm vs. MACOM Technology Solutions |
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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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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