Correlation Between Build A and Barnes Noble

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

Diversification Opportunities for Build A and Barnes Noble

0.23

Correlation Coefficient

Build A  Barnes Noble

Modest diversification

The 3 months correlation between Build and Barnes is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Build A Bear Workshop and Barnes Noble Education in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Barnes Noble Education 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 Barnes Noble. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Barnes Noble Education has no effect on the direction of Build A i.e., Build A and Barnes Noble go up and down completely randomly.

Pair Corralation between Build A and Barnes Noble

Considering the 90-day investment horizon Build A Bear Workshop is expected to under-perform the Barnes Noble. But the stock apears to be less risky and, when comparing its historical volatility, Build A Bear Workshop is 1.28 times less risky than Barnes Noble. The stock trades about -0.08 of its potential returns per unit of risk. The Barnes Noble Education is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  994.00  in Barnes Noble Education on December 20, 2024 and sell it today you would lose (26.00) from holding Barnes Noble Education or give up 2.62% of portfolio value over 90 days.

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

Build A Bear Workshop  vs.  Barnes Noble Education

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.

Barnes Noble Education

Risk-Adjusted Performance

Weak

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

Pair Trading with Build A and Barnes Noble

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

The idea behind Build A Bear Workshop and Barnes Noble Education 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.