Correlation Between Sportsmans and Big 5

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

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

Diversification Opportunities for Sportsmans and Big 5

0.66

Correlation Coefficient

Sportsmans  Big 5

Poor diversification

The 3 months correlation between Sportsmans and Big is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Sportsmans 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 Sportsmans 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 Sportsmans 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 Sportsmans i.e., Sportsmans and Big 5 go up and down completely randomly.

Pair Corralation between Sportsmans and Big 5

Given the investment horizon of 90 days Sportsmans is expected to generate 1.23 times more return on investment than Big 5. However, Sportsmans is 1.23 times more volatile than Big 5 Sporting. It trades about 0.03 of its potential returns per unit of risk. Big 5 Sporting is currently generating about 0.0 per unit of risk. If you would invest  209.00  in Sportsmans on September 1, 2024 and sell it today you would earn a total of  5.00  from holding Sportsmans or generate 2.39% return on investment over 90 days.

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

Sportsmans  vs.  Big 5 Sporting

Sportsmans

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sportsmans are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating basic indicators, Sportsmans may actually be approaching a critical reversion point that can send shares even higher in December 2024.

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 Sportsmans and Big 5

The main advantage of trading using opposite Sportsmans and Big 5 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sportsmans 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 Sportsmans 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.