Correlation Between 1 800 and Five Below
Can any of the company-specific risk be diversified away by investing in both 1 800 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 1 800 and Five Below into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between 1 800 FLOWERSCOM and Five Below, you can compare the effects of market volatilities on 1 800 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 1 800 with a short position of Five Below. Check out your portfolio center. Please also check ongoing floating volatility patterns of 1 800 and Five Below.
Diversification Opportunities for 1 800 and Five Below
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between FLWS and Five is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding 1 800 FLOWERSCOM and Five Below in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Five Below and 1 800 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 1 800 FLOWERSCOM 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 1 800 i.e., 1 800 and Five Below go up and down completely randomly.
Pair Corralation between 1 800 and Five Below
Given the investment horizon of 90 days 1 800 FLOWERSCOM is expected to under-perform the Five Below. In addition to that, 1 800 is 1.06 times more volatile than Five Below. It trades about -0.42 of its total potential returns per unit of risk. Five Below is currently generating about -0.36 per unit of volatility. If you would invest 17,388 in Five Below on January 25, 2024 and sell it today you would lose (2,562) from holding Five Below or give up 14.73% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
1 800 FLOWERSCOM vs. Five Below
Performance |
| Timeline |
| 1 800 FLOWERSCOM |
| Five Below |
1 800 and Five Below Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with 1 800 and Five Below
The main advantage of trading using opposite 1 800 and Five Below positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 1 800 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 1 800 FLOWERSCOM 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.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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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