Correlation Between Big 5 and SIGNA Sports

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

Diversification Opportunities for Big 5 and SIGNA Sports

0.5

Correlation Coefficient

Big 5  SIGNA Sports

Very weak diversification

The 3 months correlation between Big and SIGNA is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Big 5 Sporting and SIGNA Sports United in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SIGNA Sports United 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 SIGNA Sports. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SIGNA Sports United has no effect on the direction of Big 5 i.e., Big 5 and SIGNA Sports go up and down completely randomly.

Pair Corralation between Big 5 and SIGNA Sports

If you would invest  175.00  in Big 5 Sporting on September 25, 2024 and sell it today you would lose (6.00) from holding Big 5 Sporting or give up 3.43% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	4.76%
Values	Daily Returns

Big 5 Sporting  vs.  SIGNA Sports United

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

SIGNA Sports United

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SIGNA Sports United has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, SIGNA Sports is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Big 5 and SIGNA Sports

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

The idea behind Big 5 Sporting and SIGNA Sports United 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.