Correlation Between Dicks Sporting and Foot Locker
Can any of the company-specific risk be diversified away by investing in both Dicks Sporting and Foot Locker 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 Dicks Sporting and Foot Locker into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dicks Sporting Goods and Foot Locker, you can compare the effects of market volatilities on Dicks Sporting and Foot Locker 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 Dicks Sporting with a short position of Foot Locker. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dicks Sporting and Foot Locker.
Diversification Opportunities for Dicks Sporting and Foot Locker
-0.54 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Dicks and Foot is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Dicks Sporting Goods and Foot Locker in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Foot Locker and Dicks Sporting 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 Dicks Sporting Goods are associated (or correlated) with Foot Locker. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Foot Locker has no effect on the direction of Dicks Sporting i.e., Dicks Sporting and Foot Locker go up and down completely randomly.
Pair Corralation between Dicks Sporting and Foot Locker
Considering the 90-day investment horizon Dicks Sporting Goods is expected to generate 0.53 times more return on investment than Foot Locker. However, Dicks Sporting Goods is 1.88 times less risky than Foot Locker. It trades about -0.18 of its potential returns per unit of risk. Foot Locker is currently generating about -0.23 per unit of risk. If you would invest 21,899 in Dicks Sporting Goods on January 25, 2024 and sell it today you would lose (1,290) from holding Dicks Sporting Goods or give up 5.89% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dicks Sporting Goods vs. Foot Locker
Performance |
| Timeline |
| Dicks Sporting Goods |
| Foot Locker |
Dicks Sporting and Foot Locker Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dicks Sporting and Foot Locker
The main advantage of trading using opposite Dicks Sporting and Foot Locker positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dicks Sporting position performs unexpectedly, Foot Locker 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 Foot Locker will offset losses from the drop in Foot Locker's long position.The idea behind Dicks Sporting Goods and Foot Locker 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.| Foot Locker vs. Abercrombie Fitch | Foot Locker vs. Gap Inc | Foot Locker vs. Urban Outfitters | Foot Locker vs. Childrens Place |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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