Correlation Between Bath Body and Sportsmans

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

By analyzing existing cross correlation between Bath Body Works and Sportsmans, you can compare the effects of market volatilities on Bath Body and Sportsmans 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 Bath Body with a short position of Sportsmans. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bath Body and Sportsmans.

Diversification Opportunities for Bath Body and Sportsmans

0.73

Correlation Coefficient

Bath Body  Sportsmans

Poor diversification

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

Pair Corralation between Bath Body and Sportsmans

Given the investment horizon of 90 days Bath Body Works is expected to generate 0.71 times more return on investment than Sportsmans. However, Bath Body Works is 1.4 times less risky than Sportsmans. It trades about -0.1 of its potential returns per unit of risk. Sportsmans is currently generating about -0.35 per unit of risk. If you would invest  3,869  in Bath Body Works on December 29, 2024 and sell it today you would lose (774.00) from holding Bath Body Works or give up 20.01% of portfolio value over 90 days.

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

Bath Body Works  vs.  Sportsmans

Bath Body Works

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bath Body Works has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Sportsmans

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sportsmans has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Bath Body and Sportsmans

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

The idea behind Bath Body Works and Sportsmans 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 Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.