Correlation Between Leslies and Big 5

Can any of the company-specific risk be diversified away by investing in both Leslies and Big 5 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 Leslies and Big 5 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Leslies and Big 5 Sporting, you can compare the effects of market volatilities on Leslies and Big 5 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 Leslies with a short position of Big 5. Check out your portfolio center. Please also check ongoing floating volatility patterns of Leslies and Big 5.

Diversification Opportunities for Leslies and Big 5

0.97

Correlation Coefficient

Leslies  Big 5

Almost no diversification

The 3 months correlation between Leslies and Big is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Leslies and Big 5 Sporting in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Big 5 Sporting and Leslies 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 Leslies are associated (or correlated) with Big 5. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Big 5 Sporting has no effect on the direction of Leslies i.e., Leslies and Big 5 go up and down completely randomly.

Pair Corralation between Leslies and Big 5

Given the investment horizon of 90 days Leslies is expected to under-perform the Big 5. In addition to that, Leslies is 1.96 times more volatile than Big 5 Sporting. It trades about -0.24 of its total potential returns per unit of risk. Big 5 Sporting is currently generating about -0.3 per unit of volatility. If you would invest  174.00  in Big 5 Sporting on December 28, 2024 and sell it today you would lose (73.00) from holding Big 5 Sporting or give up 41.95% of portfolio value over 90 days.

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

Leslies  vs.  Big 5 Sporting

Leslies

Risk-Adjusted Performance

Very Weak

Over the last 90 days Leslies has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Big 5 Sporting

Risk-Adjusted Performance

Very Weak

Over the last 90 days Big 5 Sporting has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's technical and fundamental indicators remain fairly stable which may send shares a bit higher in April 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Leslies and Big 5

The main advantage of trading using opposite Leslies and Big 5 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Leslies position performs unexpectedly, Big 5 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 Big 5 will offset losses from the drop in Big 5's long position.

The idea behind Leslies and Big 5 Sporting 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.