Correlation Between Conns and SIGNA Sports

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

By analyzing existing cross correlation between Conns Inc and SIGNA Sports United, you can compare the effects of market volatilities on Conns 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 Conns with a short position of SIGNA Sports. Check out your portfolio center. Please also check ongoing floating volatility patterns of Conns and SIGNA Sports.

Diversification Opportunities for Conns and SIGNA Sports

0.8

Correlation Coefficient

Conns  SIGNA Sports

Very poor diversification

The 3 months correlation between Conns and SIGNA is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Conns Inc 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 Conns 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 Conns Inc 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 Conns i.e., Conns and SIGNA Sports go up and down completely randomly.

Pair Corralation between Conns and SIGNA Sports

Given the investment horizon of 90 days Conns Inc is expected to under-perform the SIGNA Sports. In addition to that, Conns is 1.56 times more volatile than SIGNA Sports United. It trades about -0.14 of its total potential returns per unit of risk. SIGNA Sports United is currently generating about -0.05 per unit of volatility. If you would invest  492.00  in SIGNA Sports United on September 25, 2024 and sell it today you would lose (219.00) from holding SIGNA Sports United or give up 44.51% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	34.41%
Values	Daily Returns

Conns Inc  vs.  SIGNA Sports United

Conns Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Conns Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Conns is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the 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 Conns and SIGNA Sports

The main advantage of trading using opposite Conns and SIGNA Sports positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Conns 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 Conns Inc 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.