Correlation Between DICKS Sporting and SCIENCE IN

Can any of the company-specific risk be diversified away by investing in both DICKS Sporting and SCIENCE IN 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 SCIENCE IN 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 SCIENCE IN SPORT, you can compare the effects of market volatilities on DICKS Sporting and SCIENCE IN 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 SCIENCE IN. Check out your portfolio center. Please also check ongoing floating volatility patterns of DICKS Sporting and SCIENCE IN.

Diversification Opportunities for DICKS Sporting and SCIENCE IN

0.31

Correlation Coefficient

DICKS Sporting  SCIENCE IN

Weak diversification

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

Pair Corralation between DICKS Sporting and SCIENCE IN

Assuming the 90 days horizon DICKS Sporting is expected to generate 1.22 times less return on investment than SCIENCE IN. But when comparing it to its historical volatility, DICKS Sporting Goods is 1.29 times less risky than SCIENCE IN. It trades about 0.05 of its potential returns per unit of risk. SCIENCE IN SPORT is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  28.00  in SCIENCE IN SPORT on September 13, 2024 and sell it today you would earn a total of  2.00  from holding SCIENCE IN SPORT or generate 7.14% return on investment over 90 days.

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

DICKS Sporting Goods  vs.  SCIENCE IN SPORT

DICKS Sporting Goods

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in DICKS Sporting Goods are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, DICKS Sporting may actually be approaching a critical reversion point that can send shares even higher in January 2025.

SCIENCE IN SPORT

Risk-Adjusted Performance

3 of 100

Insignificant

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

Pair Trading with DICKS Sporting and SCIENCE IN

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

The idea behind DICKS Sporting Goods and SCIENCE IN SPORT 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.