Correlation Between CELLULAR GOODS and DICKS Sporting

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

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

Diversification Opportunities for CELLULAR GOODS and DICKS Sporting

0.11

Correlation Coefficient

CELLULAR GOODS  DICKS Sporting

Average diversification

The 3 months correlation between CELLULAR and DICKS is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding CELLULAR GOODS LS and DICKS Sporting Goods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DICKS Sporting Goods and CELLULAR GOODS 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 CELLULAR GOODS LS are associated (or correlated) with DICKS Sporting. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DICKS Sporting Goods has no effect on the direction of CELLULAR GOODS i.e., CELLULAR GOODS and DICKS Sporting go up and down completely randomly.

Pair Corralation between CELLULAR GOODS and DICKS Sporting

Assuming the 90 days horizon CELLULAR GOODS LS is expected to generate 28.49 times more return on investment than DICKS Sporting. However, CELLULAR GOODS is 28.49 times more volatile than DICKS Sporting Goods. It trades about 0.1 of its potential returns per unit of risk. DICKS Sporting Goods is currently generating about 0.04 per unit of risk. If you would invest  0.05  in CELLULAR GOODS LS on October 8, 2024 and sell it today you would earn a total of  0.05  from holding CELLULAR GOODS LS or generate 100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

CELLULAR GOODS LS  vs.  DICKS Sporting Goods

CELLULAR GOODS LS

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CELLULAR GOODS LS are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, CELLULAR GOODS reported solid returns over the last few months and may actually be approaching a breakup point.

DICKS Sporting Goods

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in DICKS Sporting Goods are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, DICKS Sporting reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CELLULAR GOODS and DICKS Sporting

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

The idea behind CELLULAR GOODS LS and DICKS Sporting Goods 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.