Correlation Between Build A and Big 5

Can any of the company-specific risk be diversified away by investing in both Build A and Big 5 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 Big 5 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 Big 5 Sporting, you can compare the effects of market volatilities on Build A and Big 5 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 Big 5. Check out your portfolio center. Please also check ongoing floating volatility patterns of Build A and Big 5.

Diversification Opportunities for Build A and Big 5

0.73

Correlation Coefficient

Build A  Big 5

Poor diversification

The 3 months correlation between Build and Big is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Build A Bear Workshop and Big 5 Sporting in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Big 5 Sporting 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 Big 5. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Big 5 Sporting has no effect on the direction of Build A i.e., Build A and Big 5 go up and down completely randomly.

Pair Corralation between Build A and Big 5

Considering the 90-day investment horizon Build A Bear Workshop is expected to generate 1.01 times more return on investment than Big 5. However, Build A is 1.01 times more volatile than Big 5 Sporting. It trades about -0.1 of its potential returns per unit of risk. Big 5 Sporting is currently generating about -0.32 per unit of risk. If you would invest  4,667  in Build A Bear Workshop on December 27, 2024 and sell it today you would lose (815.00) from holding Build A Bear Workshop or give up 17.46% of portfolio value over 90 days.

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

Build A Bear Workshop  vs.  Big 5 Sporting

Build A Bear

Risk-Adjusted Performance

Very Weak

Over the last 90 days Build A Bear Workshop has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's fundamental drivers remain fairly stable which may send shares a bit higher in April 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Big 5 Sporting

Risk-Adjusted Performance

Very Weak

Over the last 90 days Big 5 Sporting has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's technical and fundamental indicators remain fairly stable which may send shares a bit higher in April 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Build A and Big 5

The main advantage of trading using opposite Build A and Big 5 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Build A position performs unexpectedly, Big 5 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 Big 5 will offset losses from the drop in Big 5's long position.

The idea behind Build A Bear Workshop and Big 5 Sporting 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.