Correlation Between Bridgestone and 4 Less

Can any of the company-specific risk be diversified away by investing in both Bridgestone and 4 Less 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 Bridgestone and 4 Less into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Bridgestone and 4 Less Group, you can compare the effects of market volatilities on Bridgestone and 4 Less 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 Bridgestone with a short position of 4 Less. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bridgestone and 4 Less.

Diversification Opportunities for Bridgestone and 4 Less

0.7

Correlation Coefficient

Bridgestone  4 Less

Poor diversification

The 3 months correlation between Bridgestone and FLES is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Bridgestone and 4 Less Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 4 Less Group and Bridgestone 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 Bridgestone are associated (or correlated) with 4 Less. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 4 Less Group has no effect on the direction of Bridgestone i.e., Bridgestone and 4 Less go up and down completely randomly.

Pair Corralation between Bridgestone and 4 Less

Assuming the 90 days horizon Bridgestone is expected to generate 55.71 times less return on investment than 4 Less. But when comparing it to its historical volatility, Bridgestone is 4.12 times less risky than 4 Less. It trades about 0.0 of its potential returns per unit of risk. 4 Less Group is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  0.04  in 4 Less Group on September 25, 2024 and sell it today you would lose (0.02) from holding 4 Less Group or give up 50.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Bridgestone  vs.  4 Less Group

Bridgestone

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bridgestone has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, Bridgestone is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

4 Less Group

Risk-Adjusted Performance

3 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in 4 Less Group are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal technical and fundamental indicators, 4 Less unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bridgestone and 4 Less

The main advantage of trading using opposite Bridgestone and 4 Less positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bridgestone position performs unexpectedly, 4 Less 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 4 Less will offset losses from the drop in 4 Less' long position.

The idea behind Bridgestone and 4 Less Group 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.