Correlation Between DICKS Sporting and HomeToGo

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

Diversification Opportunities for DICKS Sporting and HomeToGo

0.17

Correlation Coefficient

DICKS Sporting  HomeToGo

Average diversification

The 3 months correlation between DICKS and HomeToGo is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding DICKS Sporting Goods and HomeToGo SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HomeToGo SE 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 HomeToGo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HomeToGo SE has no effect on the direction of DICKS Sporting i.e., DICKS Sporting and HomeToGo go up and down completely randomly.

Pair Corralation between DICKS Sporting and HomeToGo

Assuming the 90 days horizon DICKS Sporting is expected to generate 2.39 times less return on investment than HomeToGo. But when comparing it to its historical volatility, DICKS Sporting Goods is 1.09 times less risky than HomeToGo. It trades about 0.05 of its potential returns per unit of risk. HomeToGo SE is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  188.00  in HomeToGo SE on September 14, 2024 and sell it today you would earn a total of  31.00  from holding HomeToGo SE or generate 16.49% return on investment over 90 days.

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

DICKS Sporting Goods  vs.  HomeToGo SE

DICKS Sporting Goods

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in DICKS Sporting Goods are ranked lower than 3 (%) 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.

HomeToGo SE

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in HomeToGo SE are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile technical and fundamental indicators, HomeToGo unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with DICKS Sporting and HomeToGo

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

The idea behind DICKS Sporting Goods and HomeToGo SE 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.