Correlation Between Big 5 and Sporttotal

Can any of the company-specific risk be diversified away by investing in both Big 5 and Sporttotal 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 Sporttotal 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 Sporttotal AG, you can compare the effects of market volatilities on Big 5 and Sporttotal 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 Sporttotal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Big 5 and Sporttotal.

Diversification Opportunities for Big 5 and Sporttotal

0.53

Correlation Coefficient

Big 5  Sporttotal

Very weak diversification

The 3 months correlation between Big and Sporttotal is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Big 5 Sporting and Sporttotal AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sporttotal 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 Sporttotal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sporttotal AG has no effect on the direction of Big 5 i.e., Big 5 and Sporttotal go up and down completely randomly.

Pair Corralation between Big 5 and Sporttotal

Assuming the 90 days horizon Big 5 Sporting is expected to generate 1.03 times more return on investment than Sporttotal. However, Big 5 is 1.03 times more volatile than Sporttotal AG. It trades about -0.01 of its potential returns per unit of risk. Sporttotal AG is currently generating about -0.06 per unit of risk. If you would invest  163.00  in Big 5 Sporting on August 31, 2024 and sell it today you would lose (13.00) from holding Big 5 Sporting or give up 7.98% of portfolio value over 90 days.

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

Big 5 Sporting  vs.  Sporttotal AG

Big 5 Sporting

Risk-Adjusted Performance

0 of 100

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 nearly stable basic indicators, Big 5 is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Sporttotal AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sporttotal AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in December 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Big 5 and Sporttotal

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

The idea behind Big 5 Sporting and Sporttotal 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.