Correlation Between Polished and Big 5

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

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

Diversification Opportunities for Polished and Big 5

0.02

Correlation Coefficient

Polished  Big 5

Significant diversification

The 3 months correlation between Polished and Big is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Polished 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 Polished 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 Polished 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 Polished i.e., Polished and Big 5 go up and down completely randomly.

Pair Corralation between Polished and Big 5

If you would invest  54.00  in Polished on September 29, 2024 and sell it today you would earn a total of  0.00  from holding Polished or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	1.59%
Values	Daily Returns

Polished  vs.  Big 5 Sporting

Polished

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Polished has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Polished is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Big 5 Sporting

Risk-Adjusted Performance

0 of 100

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 fairly stable technical and fundamental indicators, Big 5 is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Polished and Big 5

The main advantage of trading using opposite Polished and Big 5 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Polished 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 Polished 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.