Correlation Between Williams Sonoma and Sportsmans

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

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

Diversification Opportunities for Williams Sonoma and Sportsmans

-0.31

Correlation Coefficient

Williams Sonoma  Sportsmans

Very good diversification

The 3 months correlation between Williams and Sportsmans is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Williams Sonoma and Sportsmans in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sportsmans and Williams Sonoma 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 Williams Sonoma are associated (or correlated) with Sportsmans. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sportsmans has no effect on the direction of Williams Sonoma i.e., Williams Sonoma and Sportsmans go up and down completely randomly.

Pair Corralation between Williams Sonoma and Sportsmans

Considering the 90-day investment horizon Williams Sonoma is expected to generate 0.47 times more return on investment than Sportsmans. However, Williams Sonoma is 2.12 times less risky than Sportsmans. It trades about 0.12 of its potential returns per unit of risk. Sportsmans is currently generating about -0.1 per unit of risk. If you would invest  17,153  in Williams Sonoma on November 28, 2024 and sell it today you would earn a total of  2,483  from holding Williams Sonoma or generate 14.48% return on investment over 90 days.

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

Williams Sonoma  vs.  Sportsmans

Williams Sonoma

Risk-Adjusted Performance

OK

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

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 March 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Williams Sonoma and Sportsmans

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

The idea behind Williams Sonoma and Sportsmans 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.