Correlation Between Best Buy and Vail Resorts

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

Diversification Opportunities for Best Buy and Vail Resorts

0.21

Correlation Coefficient

Best Buy  Vail Resorts

Modest diversification

The 3 months correlation between Best and Vail is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Best Buy Co and Vail Resorts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vail Resorts 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 Vail Resorts. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vail Resorts has no effect on the direction of Best Buy i.e., Best Buy and Vail Resorts go up and down completely randomly.

Pair Corralation between Best Buy and Vail Resorts

Considering the 90-day investment horizon Best Buy Co is expected to under-perform the Vail Resorts. In addition to that, Best Buy is 1.22 times more volatile than Vail Resorts. It trades about -0.09 of its total potential returns per unit of risk. Vail Resorts is currently generating about -0.08 per unit of volatility. If you would invest  17,962  in Vail Resorts on December 19, 2024 and sell it today you would lose (1,889) from holding Vail Resorts or give up 10.52% of portfolio value over 90 days.

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

Best Buy Co  vs.  Vail Resorts

Best Buy

Risk-Adjusted Performance

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 April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Vail Resorts

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vail Resorts has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Best Buy and Vail Resorts

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

The idea behind Best Buy Co and Vail Resorts 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.