Correlation Between SIGNA Sports and Five Below

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

By analyzing existing cross correlation between SIGNA Sports United and Five Below, you can compare the effects of market volatilities on SIGNA Sports and Five Below 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 SIGNA Sports with a short position of Five Below. Check out your portfolio center. Please also check ongoing floating volatility patterns of SIGNA Sports and Five Below.

Diversification Opportunities for SIGNA Sports and Five Below

-0.36

Correlation Coefficient

SIGNA Sports  Five Below

Very good diversification

The 3 months correlation between SIGNA and Five is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding SIGNA Sports United and Five Below in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Five Below and SIGNA Sports 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 SIGNA Sports United are associated (or correlated) with Five Below. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Five Below has no effect on the direction of SIGNA Sports i.e., SIGNA Sports and Five Below go up and down completely randomly.

Pair Corralation between SIGNA Sports and Five Below

If you would invest  9,104  in Five Below on September 25, 2024 and sell it today you would earn a total of  1,646  from holding Five Below or generate 18.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	1.56%
Values	Daily Returns

SIGNA Sports United  vs.  Five Below

SIGNA Sports United

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SIGNA Sports United has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, SIGNA Sports is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Five Below

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Five Below are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Five Below exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SIGNA Sports and Five Below

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

The idea behind SIGNA Sports United and Five Below 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.