Correlation Between Dicks Sporting and Best Buy

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

Diversification Opportunities for Dicks Sporting and Best Buy

0.29

Correlation Coefficient

Dicks Sporting  Best Buy

Modest diversification

The 3 months correlation between Dicks and Best is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Dicks Sporting Goods and Best Buy Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Best Buy 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 Best Buy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Best Buy has no effect on the direction of Dicks Sporting i.e., Dicks Sporting and Best Buy go up and down completely randomly.

Pair Corralation between Dicks Sporting and Best Buy

Considering the 90-day investment horizon Dicks Sporting Goods is expected to generate 1.33 times more return on investment than Best Buy. However, Dicks Sporting is 1.33 times more volatile than Best Buy Co. It trades about 0.06 of its potential returns per unit of risk. Best Buy Co is currently generating about 0.03 per unit of risk. If you would invest  11,394  in Dicks Sporting Goods on August 30, 2024 and sell it today you would earn a total of  9,972  from holding Dicks Sporting Goods or generate 87.52% return on investment over 90 days.

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

Dicks Sporting Goods  vs.  Best Buy Co

Dicks Sporting Goods

Risk-Adjusted Performance

0 of 100

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.

Best Buy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Best Buy Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's fundamental drivers remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Dicks Sporting and Best Buy

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

The idea behind Dicks Sporting Goods and Best Buy Co 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.