Correlation Between United States and Best Buy
Can any of the company-specific risk be diversified away by investing in both United States 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 United States and Best Buy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between United States Steel and Best Buy Co, you can compare the effects of market volatilities on United States 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 United States with a short position of Best Buy. Check out your portfolio center. Please also check ongoing floating volatility patterns of United States and Best Buy.
Diversification Opportunities for United States and Best Buy
-0.59 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between United and Best is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding United States Steel and Best Buy Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Best Buy and United States 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 United States Steel 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 United States i.e., United States and Best Buy go up and down completely randomly.
Pair Corralation between United States and Best Buy
Taking into account the 90-day investment horizon United States Steel is expected to generate 1.03 times more return on investment than Best Buy. However, United States is 1.03 times more volatile than Best Buy Co. It trades about -0.1 of its potential returns per unit of risk. Best Buy Co is currently generating about -0.16 per unit of risk. If you would invest 4,005 in United States Steel on January 21, 2024 and sell it today you would lose (146.00) from holding United States Steel or give up 3.65% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
United States Steel vs. Best Buy Co
Performance |
| Timeline |
| United States Steel |
| Best Buy |
United States and Best Buy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United States and Best Buy
The main advantage of trading using opposite United States and Best Buy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United States 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.| United States vs. Nucor Corp | United States vs. Steel Dynamics | United States vs. ArcelorMittal SA ADR | United States vs. Gerdau SA ADR |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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