Correlation Between GEAR4MUSIC (HLDGS) and DICKS Sporting

Can any of the company-specific risk be diversified away by investing in both GEAR4MUSIC (HLDGS) and DICKS Sporting 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 GEAR4MUSIC (HLDGS) and DICKS Sporting into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between GEAR4MUSIC LS 10 and DICKS Sporting Goods, you can compare the effects of market volatilities on GEAR4MUSIC (HLDGS) and DICKS Sporting 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 GEAR4MUSIC (HLDGS) with a short position of DICKS Sporting. Check out your portfolio center. Please also check ongoing floating volatility patterns of GEAR4MUSIC (HLDGS) and DICKS Sporting.

Diversification Opportunities for GEAR4MUSIC (HLDGS) and DICKS Sporting

0.1

Correlation Coefficient

GEAR4MUSIC (HLDGS)  DICKS Sporting

Average diversification

The 3 months correlation between GEAR4MUSIC and DICKS is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding GEAR4MUSIC LS 10 and DICKS Sporting Goods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DICKS Sporting Goods and GEAR4MUSIC (HLDGS) 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 GEAR4MUSIC LS 10 are associated (or correlated) with DICKS Sporting. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DICKS Sporting Goods has no effect on the direction of GEAR4MUSIC (HLDGS) i.e., GEAR4MUSIC (HLDGS) and DICKS Sporting go up and down completely randomly.

Pair Corralation between GEAR4MUSIC (HLDGS) and DICKS Sporting

Assuming the 90 days horizon GEAR4MUSIC LS 10 is expected to under-perform the DICKS Sporting. But the stock apears to be less risky and, when comparing its historical volatility, GEAR4MUSIC LS 10 is 1.33 times less risky than DICKS Sporting. The stock trades about -0.06 of its potential returns per unit of risk. The DICKS Sporting Goods is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  19,753  in DICKS Sporting Goods on October 20, 2024 and sell it today you would earn a total of  1,337  from holding DICKS Sporting Goods or generate 6.77% return on investment over 90 days.

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

GEAR4MUSIC LS 10  vs.  DICKS Sporting Goods

GEAR4MUSIC (HLDGS)

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GEAR4MUSIC LS 10 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

DICKS Sporting Goods

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in DICKS Sporting Goods are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, DICKS Sporting may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with GEAR4MUSIC (HLDGS) and DICKS Sporting

The main advantage of trading using opposite GEAR4MUSIC (HLDGS) and DICKS Sporting positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GEAR4MUSIC (HLDGS) position performs unexpectedly, DICKS Sporting 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 DICKS Sporting will offset losses from the drop in DICKS Sporting's long position.

The idea behind GEAR4MUSIC LS 10 and DICKS Sporting Goods 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.