Correlation Between Big Lots and PriceSmart

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

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

Diversification Opportunities for Big Lots and PriceSmart

0.0

Correlation Coefficient

Big Lots  PriceSmart

Pay attention - limited upside

The 3 months correlation between Big and PriceSmart is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Big Lots and PriceSmart in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PriceSmart and Big Lots 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 Lots are associated (or correlated) with PriceSmart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PriceSmart has no effect on the direction of Big Lots i.e., Big Lots and PriceSmart go up and down completely randomly.

Pair Corralation between Big Lots and PriceSmart

If you would invest  8,948  in PriceSmart on December 1, 2024 and sell it today you would lose (9.00) from holding PriceSmart or give up 0.1% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Big Lots  vs.  PriceSmart

Big Lots

Risk-Adjusted Performance

Very Weak

Over the last 90 days Big Lots has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable forward indicators, Big Lots is not utilizing all of its potentials. The new stock price disturbance, may contribute to mid-run losses for the stockholders.

PriceSmart

Risk-Adjusted Performance

Very Weak

Over the last 90 days PriceSmart has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable primary indicators, PriceSmart is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Big Lots and PriceSmart

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

The idea behind Big Lots and PriceSmart 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.