Correlation Between Best Buy and RH
Can any of the company-specific risk be diversified away by investing in both Best Buy and RH 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 Best Buy and RH into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Best Buy Co and RH, you can compare the effects of market volatilities on Best Buy and RH 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 Best Buy with a short position of RH. Check out your portfolio center. Please also check ongoing floating volatility patterns of Best Buy and RH.
Diversification Opportunities for Best Buy and RH
Poor diversification
The 3 months correlation between Best and RH is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Best Buy Co and RH in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RH and Best Buy 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 Best Buy Co are associated (or correlated) with RH. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RH has no effect on the direction of Best Buy i.e., Best Buy and RH go up and down completely randomly.
Pair Corralation between Best Buy and RH
Considering the 90-day investment horizon Best Buy Co is expected to generate 0.4 times more return on investment than RH. However, Best Buy Co is 2.49 times less risky than RH. It trades about -0.27 of its potential returns per unit of risk. RH is currently generating about -0.14 per unit of risk. If you would invest 7,931 in Best Buy Co on February 3, 2024 and sell it today you would lose (687.00) from holding Best Buy Co or give up 8.66% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Best Buy Co vs. RH
Performance |
Timeline |
Best Buy |
RH |
Best Buy and RH Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Best Buy and RH
The main advantage of trading using opposite Best Buy and RH positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Best Buy position performs unexpectedly, RH 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 RH will offset losses from the drop in RH's long position.Best Buy vs. Target | Best Buy vs. Lowes Companies | Best Buy vs. Walmart | Best Buy vs. Aquagold International |
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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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