Correlation Between Noodles and Big 5
Can any of the company-specific risk be diversified away by investing in both Noodles 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 Noodles and Big 5 into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Noodles Company and Big 5 Sporting, you can compare the effects of market volatilities on Noodles 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 Noodles with a short position of Big 5. Check out your portfolio center. Please also check ongoing floating volatility patterns of Noodles and Big 5.
Diversification Opportunities for Noodles and Big 5
Very weak diversification
The 3 months correlation between Noodles and Big is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Noodles Company 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 Noodles 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 Noodles Company 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 Noodles i.e., Noodles and Big 5 go up and down completely randomly.
Pair Corralation between Noodles and Big 5
Given the investment horizon of 90 days Noodles Company is expected to under-perform the Big 5. In addition to that, Noodles is 1.13 times more volatile than Big 5 Sporting. It trades about -0.09 of its total potential returns per unit of risk. Big 5 Sporting is currently generating about -0.07 per unit of volatility. If you would invest 669.00 in Big 5 Sporting on August 29, 2024 and sell it today you would lose (503.00) from holding Big 5 Sporting or give up 75.19% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Noodles Company vs. Big 5 Sporting
Performance |
| Timeline |
| Noodles Company |
| Big 5 Sporting |
Noodles and Big 5 Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Noodles and Big 5
The main advantage of trading using opposite Noodles and Big 5 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Noodles 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 Noodles Company 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
Other Complementary Tools
| My Watchlist Analysis Analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like | |
| Equity Analysis Research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities | |
| Piotroski F Score Get Piotroski F Score based on the binary analysis strategy of nine different fundamentals | |
| Alpha Finder Use alpha and beta coefficients to find investment opportunities after accounting for the risk | |
| Money Managers Screen money managers from public funds and ETFs managed around the world |