Correlation Between Dicks Sporting and Bath Body
Can any of the company-specific risk be diversified away by investing in both Dicks Sporting and Bath Body 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 Dicks Sporting and Bath Body into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dicks Sporting Goods and Bath Body Works, you can compare the effects of market volatilities on Dicks Sporting and Bath Body 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 Dicks Sporting with a short position of Bath Body. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dicks Sporting and Bath Body.
Diversification Opportunities for Dicks Sporting and Bath Body
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Dicks and Bath is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Dicks Sporting Goods and Bath Body Works in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bath Body Works and Dicks Sporting 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 Dicks Sporting Goods are associated (or correlated) with Bath Body. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bath Body Works has no effect on the direction of Dicks Sporting i.e., Dicks Sporting and Bath Body go up and down completely randomly.
Pair Corralation between Dicks Sporting and Bath Body
Considering the 90-day investment horizon Dicks Sporting Goods is expected to generate 1.36 times more return on investment than Bath Body. However, Dicks Sporting is 1.36 times more volatile than Bath Body Works. It trades about 0.14 of its potential returns per unit of risk. Bath Body Works is currently generating about -0.19 per unit of risk. If you would invest 21,759 in Dicks Sporting Goods on October 20, 2024 and sell it today you would earn a total of 1,044 from holding Dicks Sporting Goods or generate 4.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dicks Sporting Goods vs. Bath Body Works
Performance |
| Timeline |
| Dicks Sporting Goods |
| Bath Body Works |
Dicks Sporting and Bath Body Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dicks Sporting and Bath Body
The main advantage of trading using opposite Dicks Sporting and Bath Body positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dicks Sporting position performs unexpectedly, Bath Body 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 Bath Body will offset losses from the drop in Bath Body's long position.| Dicks Sporting vs. RH | Dicks Sporting vs. AutoZone | Dicks Sporting vs. Best Buy Co | Dicks Sporting vs. Ulta Beauty |
| Bath Body vs. Sportsmans | Bath Body vs. Big 5 Sporting | Bath Body vs. Williams Sonoma | Bath Body vs. Dicks Sporting Goods |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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