Correlation Between Dicks Sporting and Build A

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

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

Diversification Opportunities for Dicks Sporting and Build A

0.96

Correlation Coefficient

Dicks Sporting  Build A

Almost no diversification

The 3 months correlation between Dicks and Build is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Dicks Sporting Goods and Build A Bear Workshop in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Build A Bear and Dicks Sporting 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 Dicks Sporting Goods are associated (or correlated) with Build A. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Build A Bear has no effect on the direction of Dicks Sporting i.e., Dicks Sporting and Build A go up and down completely randomly.

Pair Corralation between Dicks Sporting and Build A

Considering the 90-day investment horizon Dicks Sporting Goods is expected to under-perform the Build A. In addition to that, Dicks Sporting is 1.24 times more volatile than Build A Bear Workshop. It trades about -0.21 of its total potential returns per unit of risk. Build A Bear Workshop is currently generating about -0.15 per unit of volatility. If you would invest  2,873  in Build A Bear Workshop on January 16, 2024 and sell it today you would lose (115.00) from holding Build A Bear Workshop or give up 4.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	95.24%
Values	Daily Returns

Dicks Sporting Goods  vs.  Build A Bear Workshop

Dicks Sporting Goods

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Dicks Sporting Goods are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent forward-looking signals, Dicks Sporting unveiled solid returns over the last few months and may actually be approaching a breakup point.

Build A Bear

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Build A Bear Workshop are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent fundamental drivers, Build A showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dicks Sporting and Build A

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

The idea behind Dicks Sporting Goods and Build A Bear Workshop 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.