Correlation Between Best Buy and Parkland

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

Diversification Opportunities for Best Buy and Parkland

0.62

Correlation Coefficient

Best Buy  Parkland

Poor diversification

The 3 months correlation between Best and Parkland is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Best Buy Co and Parkland in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Parkland 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 Parkland. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Parkland has no effect on the direction of Best Buy i.e., Best Buy and Parkland go up and down completely randomly.

Pair Corralation between Best Buy and Parkland

Considering the 90-day investment horizon Best Buy Co is expected to under-perform the Parkland. But the stock apears to be less risky and, when comparing its historical volatility, Best Buy Co is 1.25 times less risky than Parkland. The stock trades about -0.12 of its potential returns per unit of risk. The Parkland is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  2,545  in Parkland on September 26, 2024 and sell it today you would lose (255.00) from holding Parkland or give up 10.02% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Best Buy Co  vs.  Parkland

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 latest uncertain performance, the Stock's fundamental drivers remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Parkland

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Parkland has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Best Buy and Parkland

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

The idea behind Best Buy Co and Parkland 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.