Correlation Between Caseys General and Build A

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

By analyzing existing cross correlation between Caseys General Stores and Build A Bear Workshop, you can compare the effects of market volatilities on Caseys General and Build A 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 Caseys General with a short position of Build A. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caseys General and Build A.

Diversification Opportunities for Caseys General and Build A

0.72

Correlation Coefficient

Caseys General  Build A

Poor diversification

The 3 months correlation between Caseys and Build is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Caseys General Stores and Build A Bear Workshop in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Build A Bear and Caseys General 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 Caseys General Stores are associated (or correlated) with Build A. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Build A Bear has no effect on the direction of Caseys General i.e., Caseys General and Build A go up and down completely randomly.

Pair Corralation between Caseys General and Build A

Given the investment horizon of 90 days Caseys General is expected to generate 1.04 times less return on investment than Build A. But when comparing it to its historical volatility, Caseys General Stores is 1.51 times less risky than Build A. It trades about 0.15 of its potential returns per unit of risk. Build A Bear Workshop is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  3,299  in Build A Bear Workshop on August 30, 2024 and sell it today you would earn a total of  515.00  from holding Build A Bear Workshop or generate 15.61% return on investment over 90 days.

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

Caseys General Stores  vs.  Build A Bear Workshop

Caseys General Stores

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Caseys General Stores are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Caseys General showed solid returns over the last few months and may actually be approaching a breakup point.

Build A Bear

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Build A Bear Workshop are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal fundamental drivers, Build A showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Caseys General and Build A

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

The idea behind Caseys General Stores and Build A Bear Workshop 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.