Correlation Between DICKS Sporting and Big 5

Can any of the company-specific risk be diversified away by investing in both DICKS Sporting and Big 5 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 Big 5 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 Big 5 Sporting, you can compare the effects of market volatilities on DICKS Sporting and Big 5 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 Big 5. Check out your portfolio center. Please also check ongoing floating volatility patterns of DICKS Sporting and Big 5.

Diversification Opportunities for DICKS Sporting and Big 5

0.71

Correlation Coefficient

DICKS Sporting  Big 5

Poor diversification

The 3 months correlation between DICKS and Big is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding DICKS Sporting Goods and Big 5 Sporting in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Big 5 Sporting 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 Big 5. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Big 5 Sporting has no effect on the direction of DICKS Sporting i.e., DICKS Sporting and Big 5 go up and down completely randomly.

Pair Corralation between DICKS Sporting and Big 5

Assuming the 90 days horizon DICKS Sporting Goods is expected to generate 0.67 times more return on investment than Big 5. However, DICKS Sporting Goods is 1.49 times less risky than Big 5. It trades about -0.08 of its potential returns per unit of risk. Big 5 Sporting is currently generating about -0.27 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.  Big 5 Sporting

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.

Big 5 Sporting

Risk-Adjusted Performance

Very Weak

Over the last 90 days Big 5 Sporting has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain 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 Big 5

The main advantage of trading using opposite DICKS Sporting and Big 5 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DICKS Sporting position performs unexpectedly, Big 5 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 Big 5 will offset losses from the drop in Big 5's long position.

The idea behind DICKS Sporting Goods and Big 5 Sporting 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.