Correlation Between Boot Barn and Globalfoundries

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

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

Diversification Opportunities for Boot Barn and Globalfoundries

-0.31

Correlation Coefficient

Boot Barn  Globalfoundries

Very good diversification

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

Pair Corralation between Boot Barn and Globalfoundries

Given the investment horizon of 90 days Boot Barn Holdings is expected to generate 1.38 times more return on investment than Globalfoundries. However, Boot Barn is 1.38 times more volatile than Globalfoundries. It trades about 0.18 of its potential returns per unit of risk. Globalfoundries is currently generating about 0.01 per unit of risk. If you would invest  13,265  in Boot Barn Holdings on September 21, 2024 and sell it today you would earn a total of  1,442  from holding Boot Barn Holdings or generate 10.87% return on investment over 90 days.

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

Boot Barn Holdings  vs.  Globalfoundries

Boot Barn Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Boot Barn Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Globalfoundries

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Globalfoundries are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical and fundamental indicators, Globalfoundries may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Boot Barn and Globalfoundries

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

The idea behind Boot Barn Holdings and Globalfoundries 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.