Correlation Between DICKS Sporting and Air Transport

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

Diversification Opportunities for DICKS Sporting and Air Transport

0.3

Correlation Coefficient

DICKS Sporting  Air Transport

Weak diversification

The 3 months correlation between DICKS and Air is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding DICKS Sporting Goods and Air Transport Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Transport Services 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 Air Transport. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air Transport Services has no effect on the direction of DICKS Sporting i.e., DICKS Sporting and Air Transport go up and down completely randomly.

Pair Corralation between DICKS Sporting and Air Transport

Assuming the 90 days horizon DICKS Sporting Goods is expected to generate 0.97 times more return on investment than Air Transport. However, DICKS Sporting Goods is 1.03 times less risky than Air Transport. It trades about 0.06 of its potential returns per unit of risk. Air Transport Services is currently generating about 0.02 per unit of risk. If you would invest  12,952  in DICKS Sporting Goods on September 12, 2024 and sell it today you would earn a total of  7,403  from holding DICKS Sporting Goods or generate 57.16% 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.  Air Transport Services

DICKS Sporting Goods

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in DICKS Sporting Goods are ranked lower than 5 (%) 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.

Air Transport Services

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Air Transport Services are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Air Transport reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with DICKS Sporting and Air Transport

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

The idea behind DICKS Sporting Goods and Air Transport Services 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.