Correlation Between G-III Apparel and DICKS Sporting

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

By analyzing existing cross correlation between G III Apparel Group and DICKS Sporting Goods, you can compare the effects of market volatilities on G-III Apparel 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 G-III Apparel with a short position of DICKS Sporting. Check out your portfolio center. Please also check ongoing floating volatility patterns of G-III Apparel and DICKS Sporting.

Diversification Opportunities for G-III Apparel and DICKS Sporting

0.68

Correlation Coefficient

G-III Apparel  DICKS Sporting

Poor diversification

The 3 months correlation between G-III and DICKS is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding G III Apparel Group 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 G-III Apparel 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 G III Apparel Group 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 G-III Apparel i.e., G-III Apparel and DICKS Sporting go up and down completely randomly.

Pair Corralation between G-III Apparel and DICKS Sporting

Assuming the 90 days trading horizon G-III Apparel is expected to generate 2.29 times less return on investment than DICKS Sporting. In addition to that, G-III Apparel is 1.26 times more volatile than DICKS Sporting Goods. It trades about 0.1 of its total potential returns per unit of risk. DICKS Sporting Goods is currently generating about 0.28 per unit of volatility. If you would invest  19,606  in DICKS Sporting Goods on October 5, 2024 and sell it today you would earn a total of  2,469  from holding DICKS Sporting Goods or generate 12.59% return on investment over 90 days.

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

G III Apparel Group  vs.  DICKS Sporting Goods

G III Apparel

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days G III Apparel Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively uncertain basic indicators, G-III Apparel unveiled solid returns over the last few months and may actually be approaching a breakup point.

DICKS Sporting Goods

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days DICKS Sporting Goods has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile basic indicators, DICKS Sporting reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with G-III Apparel and DICKS Sporting

The main advantage of trading using opposite G-III Apparel and DICKS Sporting positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if G-III Apparel 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 G III Apparel Group 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.