Correlation Between DICKS Sporting and SHELF DRILLING

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

Diversification Opportunities for DICKS Sporting and SHELF DRILLING

0.6

Correlation Coefficient

DICKS Sporting  SHELF DRILLING

Poor diversification

The 3 months correlation between DICKS and SHELF is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding DICKS Sporting Goods and SHELF DRILLING LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SHELF DRILLING LTD 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 SHELF DRILLING. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SHELF DRILLING LTD has no effect on the direction of DICKS Sporting i.e., DICKS Sporting and SHELF DRILLING go up and down completely randomly.

Pair Corralation between DICKS Sporting and SHELF DRILLING

Assuming the 90 days horizon DICKS Sporting Goods is expected to generate 0.73 times more return on investment than SHELF DRILLING. However, DICKS Sporting Goods is 1.37 times less risky than SHELF DRILLING. It trades about -0.08 of its potential returns per unit of risk. SHELF DRILLING LTD is currently generating about -0.08 per unit of risk. If you would invest  22,075  in DICKS Sporting Goods on December 28, 2024 and sell it today you would lose (3,049) from holding DICKS Sporting Goods or give up 13.81% of portfolio value over 90 days.

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

DICKS Sporting Goods  vs.  SHELF DRILLING LTD

DICKS Sporting Goods

Risk-Adjusted Performance

Very Weak

Over the last 90 days DICKS Sporting Goods has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

SHELF DRILLING LTD

Risk-Adjusted Performance

Very Weak

Over the last 90 days SHELF DRILLING LTD has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with DICKS Sporting and SHELF DRILLING

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

The idea behind DICKS Sporting Goods and SHELF DRILLING LTD 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.