Correlation Between Genuine Parts and DICKS Sporting

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

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

Diversification Opportunities for Genuine Parts and DICKS Sporting

-0.45

Correlation Coefficient

Genuine Parts  DICKS Sporting

Very good diversification

The 3 months correlation between Genuine and DICKS is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Genuine Parts 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 Genuine Parts 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 Genuine Parts 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 Genuine Parts i.e., Genuine Parts and DICKS Sporting go up and down completely randomly.

Pair Corralation between Genuine Parts and DICKS Sporting

Assuming the 90 days horizon Genuine Parts is expected to under-perform the DICKS Sporting. But the stock apears to be less risky and, when comparing its historical volatility, Genuine Parts is 1.99 times less risky than DICKS Sporting. The stock trades about -0.01 of its potential returns per unit of risk. The DICKS Sporting Goods is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  19,393  in DICKS Sporting Goods on December 2, 2024 and sell it today you would earn a total of  1,692  from holding DICKS Sporting Goods or generate 8.72% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Genuine Parts  vs.  DICKS Sporting Goods

Genuine Parts

Risk-Adjusted Performance

Very Weak

Over the last 90 days Genuine Parts has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Genuine Parts is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

DICKS Sporting Goods

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in DICKS Sporting Goods are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, DICKS Sporting may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Genuine Parts and DICKS Sporting

The main advantage of trading using opposite Genuine Parts and DICKS Sporting positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Genuine Parts 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 Genuine Parts 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.