Correlation Between Big 5 and AOYAMA TRADING

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

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

Diversification Opportunities for Big 5 and AOYAMA TRADING

-0.53

Correlation Coefficient

Big 5  AOYAMA TRADING

Excellent diversification

The 3 months correlation between Big and AOYAMA is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Big 5 Sporting and AOYAMA TRADING in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AOYAMA TRADING and Big 5 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 Big 5 Sporting are associated (or correlated) with AOYAMA TRADING. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AOYAMA TRADING has no effect on the direction of Big 5 i.e., Big 5 and AOYAMA TRADING go up and down completely randomly.

Pair Corralation between Big 5 and AOYAMA TRADING

Assuming the 90 days horizon Big 5 Sporting is expected to under-perform the AOYAMA TRADING. But the stock apears to be less risky and, when comparing its historical volatility, Big 5 Sporting is 1.15 times less risky than AOYAMA TRADING. The stock trades about -0.01 of its potential returns per unit of risk. The AOYAMA TRADING is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  835.00  in AOYAMA TRADING on September 12, 2024 and sell it today you would earn a total of  575.00  from holding AOYAMA TRADING or generate 68.86% return on investment over 90 days.

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

Big 5 Sporting  vs.  AOYAMA TRADING

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. Despite nearly stable basic indicators, Big 5 is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

AOYAMA TRADING

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AOYAMA TRADING are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, AOYAMA TRADING reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Big 5 and AOYAMA TRADING

The main advantage of trading using opposite Big 5 and AOYAMA TRADING positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Big 5 position performs unexpectedly, AOYAMA TRADING 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 AOYAMA TRADING will offset losses from the drop in AOYAMA TRADING's long position.

The idea behind Big 5 Sporting and AOYAMA TRADING 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.