Correlation Between Pet Acquisition and Big 5

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

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

Diversification Opportunities for Pet Acquisition and Big 5

0.38

Correlation Coefficient

Pet Acquisition  Big 5

Weak diversification

The 3 months correlation between Pet and Big is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Pet Acquisition LLC 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 Pet Acquisition 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 Pet Acquisition LLC 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 Pet Acquisition i.e., Pet Acquisition and Big 5 go up and down completely randomly.

Pair Corralation between Pet Acquisition and Big 5

Given the investment horizon of 90 days Pet Acquisition LLC is expected to under-perform the Big 5. But the stock apears to be less risky and, when comparing its historical volatility, Pet Acquisition LLC is 1.5 times less risky than Big 5. The stock trades about -0.03 of its potential returns per unit of risk. The Big 5 Sporting is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  175.00  in Big 5 Sporting on September 25, 2024 and sell it today you would lose (6.00) from holding Big 5 Sporting or give up 3.43% of portfolio value over 90 days.

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

Pet Acquisition LLC  vs.  Big 5 Sporting

Pet Acquisition LLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pet Acquisition LLC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Pet Acquisition is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

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 recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Pet Acquisition and Big 5

The main advantage of trading using opposite Pet Acquisition and Big 5 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pet Acquisition 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 Pet Acquisition LLC 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.