Correlation Between PriceSmart and Ollies Bargain

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

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

Diversification Opportunities for PriceSmart and Ollies Bargain

0.18

Correlation Coefficient

PriceSmart  Ollies Bargain

Average diversification

The 3 months correlation between PriceSmart and Ollies is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding PriceSmart and Ollies Bargain Outlet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ollies Bargain Outlet and PriceSmart 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 PriceSmart are associated (or correlated) with Ollies Bargain. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ollies Bargain Outlet has no effect on the direction of PriceSmart i.e., PriceSmart and Ollies Bargain go up and down completely randomly.

Pair Corralation between PriceSmart and Ollies Bargain

Given the investment horizon of 90 days PriceSmart is expected to generate 1.68 times less return on investment than Ollies Bargain. But when comparing it to its historical volatility, PriceSmart is 1.33 times less risky than Ollies Bargain. It trades about 0.05 of its potential returns per unit of risk. Ollies Bargain Outlet is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  5,273  in Ollies Bargain Outlet on September 2, 2024 and sell it today you would earn a total of  4,622  from holding Ollies Bargain Outlet or generate 87.65% return on investment over 90 days.

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

PriceSmart  vs.  Ollies Bargain Outlet

PriceSmart

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in PriceSmart are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable primary indicators, PriceSmart is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Ollies Bargain Outlet

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ollies Bargain Outlet are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak essential indicators, Ollies Bargain may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with PriceSmart and Ollies Bargain

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

The idea behind PriceSmart and Ollies Bargain Outlet 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.