Correlation Between RH and Ollies Bargain

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

By analyzing existing cross correlation between RH and Ollies Bargain Outlet, you can compare the effects of market volatilities on RH and Ollies Bargain 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 RH with a short position of Ollies Bargain. Check out your portfolio center. Please also check ongoing floating volatility patterns of RH and Ollies Bargain.

Diversification Opportunities for RH and Ollies Bargain

0.81

Correlation Coefficient

RH  Ollies Bargain

Very poor diversification

The 3 months correlation between RH and Ollies is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding RH and Ollies Bargain Outlet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ollies Bargain Outlet and RH 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 RH are associated (or correlated) with Ollies Bargain. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ollies Bargain Outlet has no effect on the direction of RH i.e., RH and Ollies Bargain go up and down completely randomly.

Pair Corralation between RH and Ollies Bargain

Allowing for the 90-day total investment horizon RH is expected to generate 1.28 times more return on investment than Ollies Bargain. However, RH is 1.28 times more volatile than Ollies Bargain Outlet. It trades about 0.08 of its potential returns per unit of risk. Ollies Bargain Outlet is currently generating about 0.1 per unit of risk. If you would invest  34,460  in RH on September 24, 2024 and sell it today you would earn a total of  5,366  from holding RH or generate 15.57% return on investment over 90 days.

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

RH  vs.  Ollies Bargain Outlet

RH

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in RH are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain technical indicators, RH demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Ollies Bargain Outlet

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ollies Bargain Outlet are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady essential indicators, Ollies Bargain demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with RH and Ollies Bargain

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

The idea behind RH and Ollies Bargain Outlet 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.