Correlation Between National Retail and DICKS Sporting

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

By analyzing existing cross correlation between National Retail Properties and DICKS Sporting Goods, you can compare the effects of market volatilities on National Retail 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 National Retail with a short position of DICKS Sporting. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Retail and DICKS Sporting.

Diversification Opportunities for National Retail and DICKS Sporting

-0.34

Correlation Coefficient

National Retail  DICKS Sporting

Very good diversification

The 3 months correlation between National and DICKS is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding National Retail Properties 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 National Retail 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 National Retail Properties 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 National Retail i.e., National Retail and DICKS Sporting go up and down completely randomly.

Pair Corralation between National Retail and DICKS Sporting

Assuming the 90 days trading horizon National Retail Properties is expected to under-perform the DICKS Sporting. But the stock apears to be less risky and, when comparing its historical volatility, National Retail Properties is 2.0 times less risky than DICKS Sporting. The stock trades about -0.07 of its potential returns per unit of risk. The DICKS Sporting Goods is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  18,657  in DICKS Sporting Goods on October 7, 2024 and sell it today you would earn a total of  3,088  from holding DICKS Sporting Goods or generate 16.55% return on investment over 90 days.

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

National Retail Properties  vs.  DICKS Sporting Goods

National Retail Prop

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days National Retail Properties has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

DICKS Sporting Goods

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in DICKS Sporting Goods are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, DICKS Sporting reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with National Retail and DICKS Sporting

The main advantage of trading using opposite National Retail and DICKS Sporting positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Retail 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 National Retail Properties 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..