Correlation Between Big 5 and Polished

Can any of the company-specific risk be diversified away by investing in both Big 5 and Polished 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 Polished 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 Polished, you can compare the effects of market volatilities on Big 5 and Polished 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 Polished. Check out your portfolio center. Please also check ongoing floating volatility patterns of Big 5 and Polished.

Diversification Opportunities for Big 5 and Polished

0.18

Correlation Coefficient

Big 5  Polished

Average diversification

The 3 months correlation between Big and Polished is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Big 5 Sporting and Polished in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Polished 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 Polished. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Polished has no effect on the direction of Big 5 i.e., Big 5 and Polished go up and down completely randomly.

Pair Corralation between Big 5 and Polished

If you would invest  175.00  in Big 5 Sporting on September 24, 2024 and sell it today you would earn a total of  2.00  from holding Big 5 Sporting or generate 1.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	5.0%
Values	Daily Returns

Big 5 Sporting  vs.  Polished

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 latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

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.

Pair Trading with Big 5 and Polished

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

The idea behind Big 5 Sporting and Polished 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.