Correlation Between DICKS Sporting and Kforce

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

Diversification Opportunities for DICKS Sporting and Kforce

0.29

Correlation Coefficient

DICKS Sporting  Kforce

Modest diversification

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

Pair Corralation between DICKS Sporting and Kforce

Assuming the 90 days horizon DICKS Sporting Goods is expected to generate 2.1 times more return on investment than Kforce. However, DICKS Sporting is 2.1 times more volatile than Kforce Inc. It trades about 0.27 of its potential returns per unit of risk. Kforce Inc is currently generating about -0.08 per unit of risk. If you would invest  19,393  in DICKS Sporting Goods on October 3, 2024 and sell it today you would earn a total of  2,682  from holding DICKS Sporting Goods or generate 13.83% 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.  Kforce Inc

DICKS Sporting Goods

Risk-Adjusted Performance

9 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in DICKS Sporting Goods are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, DICKS Sporting reported solid returns over the last few months and may actually be approaching a breakup point.

Kforce Inc

Risk-Adjusted Performance

2 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Kforce Inc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Kforce is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with DICKS Sporting and Kforce

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

The idea behind DICKS Sporting Goods and Kforce Inc 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.