Correlation Between Best Buy and Aarons
Can any of the company-specific risk be diversified away by investing in both Best Buy and Aarons 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 Best Buy and Aarons into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Best Buy Co and The Aarons, you can compare the effects of market volatilities on Best Buy and Aarons 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 Best Buy with a short position of Aarons. Check out your portfolio center. Please also check ongoing floating volatility patterns of Best Buy and Aarons.
Diversification Opportunities for Best Buy and Aarons
Excellent diversification
The 3 months correlation between Best and Aarons is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Best Buy Co and The Aarons in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aarons and Best Buy 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 Best Buy Co are associated (or correlated) with Aarons. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aarons has no effect on the direction of Best Buy i.e., Best Buy and Aarons go up and down completely randomly.
Pair Corralation between Best Buy and Aarons
Considering the 90-day investment horizon Best Buy Co is expected to generate 0.45 times more return on investment than Aarons. However, Best Buy Co is 2.24 times less risky than Aarons. It trades about 0.07 of its potential returns per unit of risk. The Aarons is currently generating about -0.22 per unit of risk. If you would invest 7,286 in Best Buy Co on January 17, 2024 and sell it today you would earn a total of 343.00 from holding Best Buy Co or generate 4.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Best Buy Co vs. The Aarons
Performance |
| Timeline |
| Best Buy |
| Aarons |
Best Buy and Aarons Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Best Buy and Aarons
The main advantage of trading using opposite Best Buy and Aarons positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Best Buy position performs unexpectedly, Aarons 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 Aarons will offset losses from the drop in Aarons' long position.The idea behind Best Buy Co and The Aarons 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.| Aarons vs. Custom Truck One | Aarons vs. PROG Holdings | Aarons vs. McGrath RentCorp | Aarons vs. HE Equipment Services |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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