Correlation Between Sportsmans and Five Below

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

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

Diversification Opportunities for Sportsmans and Five Below

0.63

Correlation Coefficient

Sportsmans  Five Below

Poor diversification

The 3 months correlation between Sportsmans and Five is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Sportsmans and Five Below in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Five Below and Sportsmans 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 Sportsmans 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 Sportsmans i.e., Sportsmans and Five Below go up and down completely randomly.

Pair Corralation between Sportsmans and Five Below

Given the investment horizon of 90 days Sportsmans is expected to under-perform the Five Below. In addition to that, Sportsmans is 1.47 times more volatile than Five Below. It trades about -0.35 of its total potential returns per unit of risk. Five Below is currently generating about -0.18 per unit of volatility. If you would invest  10,401  in Five Below on December 30, 2024 and sell it today you would lose (3,081) from holding Five Below or give up 29.62% of portfolio value over 90 days.

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

Sportsmans  vs.  Five Below

Sportsmans

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sportsmans has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Five Below

Risk-Adjusted Performance

Very Weak

Over the last 90 days Five Below has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Sportsmans and Five Below

The main advantage of trading using opposite Sportsmans and Five Below positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sportsmans 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 Sportsmans 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.