Correlation Between Big Lots and Fossil
Can any of the company-specific risk be diversified away by investing in both Big Lots and Fossil 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 Big Lots and Fossil into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Big Lots and Fossil Group, you can compare the effects of market volatilities on Big Lots and Fossil 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 Big Lots with a short position of Fossil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Big Lots and Fossil.
Diversification Opportunities for Big Lots and Fossil
Very poor diversification
The 3 months correlation between Big and Fossil is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Big Lots and Fossil Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fossil Group and Big Lots 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 Big Lots are associated (or correlated) with Fossil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fossil Group has no effect on the direction of Big Lots i.e., Big Lots and Fossil go up and down completely randomly.
Pair Corralation between Big Lots and Fossil
Considering the 90-day investment horizon Big Lots is expected to generate 1.27 times more return on investment than Fossil. However, Big Lots is 1.27 times more volatile than Fossil Group. It trades about -0.03 of its potential returns per unit of risk. Fossil Group is currently generating about -0.08 per unit of risk. If you would invest 874.00 in Big Lots on January 26, 2024 and sell it today you would lose (533.00) from holding Big Lots or give up 60.98% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Big Lots vs. Fossil Group
Performance |
Timeline |
Big Lots |
Fossil Group |
Big Lots and Fossil Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Big Lots and Fossil
The main advantage of trading using opposite Big Lots and Fossil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Big Lots position performs unexpectedly, Fossil 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 Fossil will offset losses from the drop in Fossil's long position.The idea behind Big Lots and Fossil Group 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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