Correlation Between Kohls Corp and Big 5

Can any of the company-specific risk be diversified away by investing in both Kohls Corp and Big 5 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 Kohls Corp and Big 5 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Kohls Corp and Big 5 Sporting, you can compare the effects of market volatilities on Kohls Corp and Big 5 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 Kohls Corp with a short position of Big 5. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kohls Corp and Big 5.

Diversification Opportunities for Kohls Corp and Big 5

0.75

Correlation Coefficient

Kohls Corp  Big 5

Poor diversification

The 3 months correlation between Kohls and Big is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Kohls Corp and Big 5 Sporting in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Big 5 Sporting and Kohls Corp 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 Kohls Corp are associated (or correlated) with Big 5. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Big 5 Sporting has no effect on the direction of Kohls Corp i.e., Kohls Corp and Big 5 go up and down completely randomly.

Pair Corralation between Kohls Corp and Big 5

Considering the 90-day investment horizon Kohls Corp is expected to under-perform the Big 5. But the stock apears to be less risky and, when comparing its historical volatility, Kohls Corp is 1.21 times less risky than Big 5. The stock trades about -0.11 of its potential returns per unit of risk. The Big 5 Sporting is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  188.00  in Big 5 Sporting on September 3, 2024 and sell it today you would lose (11.00) from holding Big 5 Sporting or give up 5.85% of portfolio value over 90 days.

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

Kohls Corp  vs.  Big 5 Sporting

Kohls Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kohls Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Big 5 Sporting

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Big 5 Sporting has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable technical and fundamental indicators, Big 5 is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Kohls Corp and Big 5

The main advantage of trading using opposite Kohls Corp and Big 5 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kohls Corp position performs unexpectedly, Big 5 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 Big 5 will offset losses from the drop in Big 5's long position.

The idea behind Kohls Corp and Big 5 Sporting 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.

Check out your portfolio center.

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 Equity Valuation module to check real value of public entities based on technical and fundamental data.