Correlation Between DICKS Sporting and Iron Mountain

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

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

Diversification Opportunities for DICKS Sporting and Iron Mountain

0.18

Correlation Coefficient

DICKS Sporting  Iron Mountain

Average diversification

The 3 months correlation between DICKS and Iron is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding DICKS Sporting Goods, and Iron Mountain Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iron Mountain and DICKS Sporting 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 DICKS Sporting Goods, are associated (or correlated) with Iron Mountain. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Iron Mountain has no effect on the direction of DICKS Sporting i.e., DICKS Sporting and Iron Mountain go up and down completely randomly.

Pair Corralation between DICKS Sporting and Iron Mountain

Assuming the 90 days trading horizon DICKS Sporting Goods, is expected to generate 1.59 times more return on investment than Iron Mountain. However, DICKS Sporting is 1.59 times more volatile than Iron Mountain Incorporated. It trades about 0.12 of its potential returns per unit of risk. Iron Mountain Incorporated is currently generating about -0.46 per unit of risk. If you would invest  13,203  in DICKS Sporting Goods, on October 4, 2024 and sell it today you would earn a total of  624.00  from holding DICKS Sporting Goods, or generate 4.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	88.89%
Values	Daily Returns

DICKS Sporting Goods,  vs.  Iron Mountain Incorporated

DICKS Sporting Goods,

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days DICKS Sporting Goods, has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat weak forward-looking signals, DICKS Sporting sustained solid returns over the last few months and may actually be approaching a breakup point.

Iron Mountain

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Iron Mountain Incorporated has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Iron Mountain is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with DICKS Sporting and Iron Mountain

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

The idea behind DICKS Sporting Goods, and Iron Mountain Incorporated 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.