Correlation Between Dicks Sporting and Childrens Place

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

Diversification Opportunities for Dicks Sporting and Childrens Place

-0.67

Correlation Coefficient

Dicks Sporting  Childrens Place

Excellent diversification

The 3 months correlation between Dicks and Childrens is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Dicks Sporting Goods and Childrens Place in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Childrens Place 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 Childrens Place. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Childrens Place has no effect on the direction of Dicks Sporting i.e., Dicks Sporting and Childrens Place go up and down completely randomly.

Pair Corralation between Dicks Sporting and Childrens Place

Considering the 90-day investment horizon Dicks Sporting Goods is expected to generate 0.34 times more return on investment than Childrens Place. However, Dicks Sporting Goods is 2.95 times less risky than Childrens Place. It trades about 0.05 of its potential returns per unit of risk. Childrens Place is currently generating about -0.15 per unit of risk. If you would invest  21,428  in Dicks Sporting Goods on December 1, 2024 and sell it today you would earn a total of  1,082  from holding Dicks Sporting Goods or generate 5.05% return on investment over 90 days.

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

Dicks Sporting Goods  vs.  Childrens Place

Dicks Sporting Goods

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Dicks Sporting Goods are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent forward-looking signals, Dicks Sporting may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Childrens Place

Risk-Adjusted Performance

Very Weak

Over the last 90 days Childrens Place has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Dicks Sporting and Childrens Place

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

The idea behind Dicks Sporting Goods and Childrens Place 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.