Correlation Between Best Buy and Six Flags

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

By analyzing existing cross correlation between Best Buy Co and Six Flags Entertainment, you can compare the effects of market volatilities on Best Buy and Six Flags 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 Best Buy with a short position of Six Flags. Check out your portfolio center. Please also check ongoing floating volatility patterns of Best Buy and Six Flags.

Diversification Opportunities for Best Buy and Six Flags

-0.86

Correlation Coefficient

Best Buy  Six Flags

Pay attention - limited upside

The 3 months correlation between Best and Six is -0.86. Overlapping area represents the amount of risk that can be diversified away by holding Best Buy Co and Six Flags Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Six Flags Entertainment and Best Buy 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 Best Buy Co are associated (or correlated) with Six Flags. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Six Flags Entertainment has no effect on the direction of Best Buy i.e., Best Buy and Six Flags go up and down completely randomly.

Pair Corralation between Best Buy and Six Flags

Considering the 90-day investment horizon Best Buy Co is expected to under-perform the Six Flags. But the stock apears to be less risky and, when comparing its historical volatility, Best Buy Co is 1.36 times less risky than Six Flags. The stock trades about -0.11 of its potential returns per unit of risk. The Six Flags Entertainment is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  4,664  in Six Flags Entertainment on October 8, 2024 and sell it today you would earn a total of  166.00  from holding Six Flags Entertainment or generate 3.56% return on investment over 90 days.

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

Best Buy Co  vs.  Six Flags Entertainment

Best Buy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Best Buy Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's fundamental drivers remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Six Flags Entertainment

Risk-Adjusted Performance

16 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Six Flags Entertainment are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, Six Flags displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Best Buy and Six Flags

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

The idea behind Best Buy Co and Six Flags Entertainment 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.