Correlation Between Floor Decor and Best Buy
Can any of the company-specific risk be diversified away by investing in both Floor Decor and Best Buy 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 Floor Decor and Best Buy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Floor Decor Holdings and Best Buy Co, you can compare the effects of market volatilities on Floor Decor and Best Buy 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 Floor Decor with a short position of Best Buy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Floor Decor and Best Buy.
Diversification Opportunities for Floor Decor and Best Buy
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Floor and Best is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Floor Decor Holdings and Best Buy Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Best Buy and Floor Decor 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 Floor Decor Holdings are associated (or correlated) with Best Buy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Best Buy has no effect on the direction of Floor Decor i.e., Floor Decor and Best Buy go up and down completely randomly.
Pair Corralation between Floor Decor and Best Buy
Considering the 90-day investment horizon Floor Decor Holdings is expected to generate 1.37 times more return on investment than Best Buy. However, Floor Decor is 1.37 times more volatile than Best Buy Co. It trades about 0.11 of its potential returns per unit of risk. Best Buy Co is currently generating about -0.01 per unit of risk. If you would invest 10,245 in Floor Decor Holdings on September 18, 2024 and sell it today you would earn a total of 609.50 from holding Floor Decor Holdings or generate 5.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Floor Decor Holdings vs. Best Buy Co
Performance |
| Timeline |
| Floor Decor Holdings |
| Best Buy |
Floor Decor and Best Buy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Floor Decor and Best Buy
The main advantage of trading using opposite Floor Decor and Best Buy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Floor Decor position performs unexpectedly, Best Buy 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 Best Buy will offset losses from the drop in Best Buy's long position.| Floor Decor vs. Aquagold International | Floor Decor vs. Thrivent High Yield | Floor Decor vs. Morningstar Unconstrained Allocation | Floor Decor vs. Via Renewables |
| Best Buy vs. Arhaus Inc | Best Buy vs. Floor Decor Holdings | Best Buy vs. Live Ventures | Best Buy vs. Macys Inc |
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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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