Correlation Between Build A and Five Below

Can any of the company-specific risk be diversified away by investing in both Build A and Five Below 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 Build A and Five Below into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Build A Bear Workshop and Five Below, you can compare the effects of market volatilities on Build A and Five Below 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 Build A with a short position of Five Below. Check out your portfolio center. Please also check ongoing floating volatility patterns of Build A and Five Below.

Diversification Opportunities for Build A and Five Below

-0.52

Correlation Coefficient

Build A  Five Below

Excellent diversification

The 12 months correlation between Build and Five is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Build A Bear Workshop and Five Below in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Five Below and Build A 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 Build A Bear Workshop are associated (or correlated) with Five Below. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Five Below has no effect on the direction of Build A i.e., Build A and Five Below go up and down completely randomly.

Pair Corralation between Build A and Five Below

Considering the 90-day investment horizon Build A Bear Workshop is expected to generate 0.61 times more return on investment than Five Below. However, Build A Bear Workshop is 1.64 times less risky than Five Below. It trades about -0.05 of its potential returns per unit of risk. Five Below is currently generating about -0.34 per unit of risk. If you would invest  2,866  in Build A Bear Workshop on January 21, 2024 and sell it today you would lose (47.00) from holding Build A Bear Workshop or give up 1.64% of portfolio value over 90 days.

Time Period	12 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.65%
Values	Daily Returns

Build A Bear Workshop  vs.  Five Below

Build A Bear

Risk-Adjusted Performance

4 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Build A Bear Workshop are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental drivers, Build A may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Five Below

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Five Below has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Five Below is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Build A and Five Below

The main advantage of trading using opposite Build A and Five Below positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Build A position performs unexpectedly, Five Below 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 Five Below will offset losses from the drop in Five Below's long position.

The idea behind Build A Bear Workshop and Five Below 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.

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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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.