Correlation Between Big 5 and Dicks Sporting

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

Diversification Opportunities for Big 5 and Dicks Sporting

0.72

Correlation Coefficient

Big 5  Dicks Sporting

Poor diversification

The 3 months correlation between Big and Dicks is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Big 5 Sporting and Dicks Sporting Goods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dicks Sporting Goods 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 Dicks Sporting. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dicks Sporting Goods has no effect on the direction of Big 5 i.e., Big 5 and Dicks Sporting go up and down completely randomly.

Pair Corralation between Big 5 and Dicks Sporting

Given the investment horizon of 90 days Big 5 Sporting is expected to under-perform the Dicks Sporting. In addition to that, Big 5 is 1.26 times more volatile than Dicks Sporting Goods. It trades about -0.32 of its total potential returns per unit of risk. Dicks Sporting Goods is currently generating about -0.08 per unit of volatility. If you would invest  23,407  in Dicks Sporting Goods on December 27, 2024 and sell it today you would lose (2,718) from holding Dicks Sporting Goods or give up 11.61% of portfolio value over 90 days.

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

Big 5 Sporting  vs.  Dicks Sporting Goods

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. In spite of conflicting performance in the last few months, the Stock's technical and fundamental indicators remain fairly stable which may send shares a bit higher in April 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Dicks Sporting Goods

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dicks Sporting Goods has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's forward-looking signals remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Big 5 and Dicks Sporting

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

The idea behind Big 5 Sporting and Dicks Sporting Goods 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.