Correlation Between Big 5 and United Internet

Can any of the company-specific risk be diversified away by investing in both Big 5 and United Internet 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 Big 5 and United Internet into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Big 5 Sporting and United Internet AG, you can compare the effects of market volatilities on Big 5 and United Internet 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 Big 5 with a short position of United Internet. Check out your portfolio center. Please also check ongoing floating volatility patterns of Big 5 and United Internet.

Diversification Opportunities for Big 5 and United Internet

-0.6

Correlation Coefficient

Big 5  United Internet

Excellent diversification

The 3 months correlation between Big and United is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Big 5 Sporting and United Internet AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Internet AG and Big 5 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 Big 5 Sporting are associated (or correlated) with United Internet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Internet AG has no effect on the direction of Big 5 i.e., Big 5 and United Internet go up and down completely randomly.

Pair Corralation between Big 5 and United Internet

Assuming the 90 days horizon Big 5 Sporting is expected to under-perform the United Internet. In addition to that, Big 5 is 1.61 times more volatile than United Internet AG. It trades about -0.25 of its total potential returns per unit of risk. United Internet AG is currently generating about 0.15 per unit of volatility. If you would invest  1,533  in United Internet AG on December 26, 2024 and sell it today you would earn a total of  352.00  from holding United Internet AG or generate 22.96% return on investment over 90 days.

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

Big 5 Sporting  vs.  United Internet AG

Big 5 Sporting

Risk-Adjusted Performance

Very Weak

Over the last 90 days Big 5 Sporting has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

United Internet AG

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in United Internet AG are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain fundamental indicators, United Internet reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Big 5 and United Internet

The main advantage of trading using opposite Big 5 and United Internet positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Big 5 position performs unexpectedly, United Internet 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 United Internet will offset losses from the drop in United Internet's long position.

The idea behind Big 5 Sporting and United Internet AG 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.