Correlation Between ODP Corp and Big 5

Can any of the company-specific risk be diversified away by investing in both ODP 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 ODP 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 ODP Corp and Big 5 Sporting, you can compare the effects of market volatilities on ODP 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 ODP Corp with a short position of Big 5. Check out your portfolio center. Please also check ongoing floating volatility patterns of ODP Corp and Big 5.

Diversification Opportunities for ODP Corp and Big 5

0.53

Correlation Coefficient

ODP Corp  Big 5

Very weak diversification

The 3 months correlation between ODP and Big is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding ODP 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 ODP 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 ODP 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 ODP Corp i.e., ODP Corp and Big 5 go up and down completely randomly.

Pair Corralation between ODP Corp and Big 5

Considering the 90-day investment horizon ODP Corp is expected to under-perform the Big 5. But the stock apears to be less risky and, when comparing its historical volatility, ODP Corp is 1.78 times less risky than Big 5. The stock trades about -0.09 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 1, 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	Weak
Accuracy	100.0%
Values	Daily Returns

ODP Corp  vs.  Big 5 Sporting

ODP Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ODP Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Even with conflicting performance in the last few months, the Stock's fundamental indicators remain relatively invariable which may send shares a bit higher in December 2024. The latest agitation may also be a sign of long-running up-swing for the enterprise retail 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 ODP Corp and Big 5

The main advantage of trading using opposite ODP Corp and Big 5 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ODP 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 ODP 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.

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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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.