Correlation Between Dillards and Pick N

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

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

Diversification Opportunities for Dillards and Pick N

0.77

Correlation Coefficient

Dillards  Pick N

Poor diversification

The 3 months correlation between Dillards and Pick is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Dillards and Pick n Pay in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pick n Pay and Dillards 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 Dillards are associated (or correlated) with Pick N. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pick n Pay has no effect on the direction of Dillards i.e., Dillards and Pick N go up and down completely randomly.

Pair Corralation between Dillards and Pick N

Assuming the 90 days trading horizon Dillards is expected to generate 0.99 times more return on investment than Pick N. However, Dillards is 1.01 times less risky than Pick N. It trades about 0.21 of its potential returns per unit of risk. Pick n Pay is currently generating about 0.19 per unit of risk. If you would invest  30,378  in Dillards on August 31, 2024 and sell it today you would earn a total of  11,622  from holding Dillards or generate 38.26% return on investment over 90 days.

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

Dillards  vs.  Pick n Pay

Dillards

Risk-Adjusted Performance

16 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dillards are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Dillards reported solid returns over the last few months and may actually be approaching a breakup point.

Pick n Pay

Risk-Adjusted Performance

15 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Pick n Pay are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Pick N reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dillards and Pick N

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

The idea behind Dillards and Pick n Pay 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.