Correlation Between Leslies and Five Below

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

By analyzing existing cross correlation between Leslies and Five Below, you can compare the effects of market volatilities on Leslies and Five Below 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 Five Below. Check out your portfolio center. Please also check ongoing floating volatility patterns of Leslies and Five Below.

Diversification Opportunities for Leslies and Five Below

-0.15

Correlation Coefficient

Leslies  Five Below

Good diversification

The 3 months correlation between Leslies and Five is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Leslies and Five Below in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Five Below 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 Five Below. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Five Below has no effect on the direction of Leslies i.e., Leslies and Five Below go up and down completely randomly.

Pair Corralation between Leslies and Five Below

Given the investment horizon of 90 days Leslies is expected to under-perform the Five Below. In addition to that, Leslies is 1.84 times more volatile than Five Below. It trades about -0.02 of its total potential returns per unit of risk. Five Below is currently generating about 0.12 per unit of volatility. If you would invest  7,543  in Five Below on August 30, 2024 and sell it today you would earn a total of  1,758  from holding Five Below or generate 23.31% return on investment over 90 days.

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

Leslies  vs.  Five Below

Leslies

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Leslies has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Five Below

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Five Below are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Five Below exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Leslies and Five Below

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

The idea behind Leslies and Five Below 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.