Correlation Between DICKS Sporting and UMWELTBANK

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

Diversification Opportunities for DICKS Sporting and UMWELTBANK

0.61

Correlation Coefficient

DICKS Sporting  UMWELTBANK

Poor diversification

The 3 months correlation between DICKS and UMWELTBANK is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding DICKS Sporting Goods and UMWELTBANK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UMWELTBANK 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 UMWELTBANK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UMWELTBANK has no effect on the direction of DICKS Sporting i.e., DICKS Sporting and UMWELTBANK go up and down completely randomly.

Pair Corralation between DICKS Sporting and UMWELTBANK

Assuming the 90 days horizon DICKS Sporting Goods is expected to generate 1.36 times more return on investment than UMWELTBANK. However, DICKS Sporting is 1.36 times more volatile than UMWELTBANK. It trades about 0.08 of its potential returns per unit of risk. UMWELTBANK is currently generating about -0.04 per unit of risk. If you would invest  13,684  in DICKS Sporting Goods on October 24, 2024 and sell it today you would earn a total of  8,071  from holding DICKS Sporting Goods or generate 58.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.6%
Values	Daily Returns

DICKS Sporting Goods  vs.  UMWELTBANK

DICKS Sporting Goods

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in DICKS Sporting Goods are ranked lower than 7 (%) 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.

UMWELTBANK

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in UMWELTBANK are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable forward-looking signals, UMWELTBANK is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with DICKS Sporting and UMWELTBANK

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

The idea behind DICKS Sporting Goods and UMWELTBANK 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.