Correlation Between Dicks Sporting and Dixons Carphone

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

By analyzing existing cross correlation between Dicks Sporting Goods and Dixons Carphone plc, you can compare the effects of market volatilities on Dicks Sporting and Dixons Carphone 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 Dicks Sporting with a short position of Dixons Carphone. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dicks Sporting and Dixons Carphone.

Diversification Opportunities for Dicks Sporting and Dixons Carphone

0.35

Correlation Coefficient

Dicks Sporting  Dixons Carphone

Weak diversification

The 3 months correlation between Dicks and Dixons is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Dicks Sporting Goods and Dixons Carphone plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dixons Carphone plc and Dicks Sporting 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 Dicks Sporting Goods are associated (or correlated) with Dixons Carphone. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dixons Carphone plc has no effect on the direction of Dicks Sporting i.e., Dicks Sporting and Dixons Carphone go up and down completely randomly.

Pair Corralation between Dicks Sporting and Dixons Carphone

Considering the 90-day investment horizon Dicks Sporting Goods is expected to generate 0.76 times more return on investment than Dixons Carphone. However, Dicks Sporting Goods is 1.32 times less risky than Dixons Carphone. It trades about 0.07 of its potential returns per unit of risk. Dixons Carphone plc is currently generating about 0.05 per unit of risk. If you would invest  12,203  in Dicks Sporting Goods on September 29, 2024 and sell it today you would earn a total of  11,204  from holding Dicks Sporting Goods or generate 91.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.4%
Values	Daily Returns

Dicks Sporting Goods  vs.  Dixons Carphone plc

Dicks Sporting Goods

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Dicks Sporting Goods are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating forward-looking signals, Dicks Sporting unveiled solid returns over the last few months and may actually be approaching a breakup point.

Dixons Carphone plc

Risk-Adjusted Performance

3 of 100

Insignificant

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

Pair Trading with Dicks Sporting and Dixons Carphone

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

The idea behind Dicks Sporting Goods and Dixons Carphone plc 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.