Correlation Between Big 5 and Guess

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

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

Diversification Opportunities for Big 5 and Guess

-0.76

Correlation Coefficient

Big 5  Guess

Pay attention - limited upside

The 3 months correlation between Big and Guess is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Big 5 Sporting and Guess Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guess Inc and Big 5 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 5 Sporting are associated (or correlated) with Guess. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guess Inc has no effect on the direction of Big 5 i.e., Big 5 and Guess go up and down completely randomly.

Pair Corralation between Big 5 and Guess

Given the investment horizon of 90 days Big 5 Sporting is expected to generate 1.68 times more return on investment than Guess. However, Big 5 is 1.68 times more volatile than Guess Inc. It trades about 0.01 of its potential returns per unit of risk. Guess Inc is currently generating about -0.21 per unit of risk. If you would invest  340.00  in Big 5 Sporting on February 2, 2024 and sell it today you would earn a total of  0.00  from holding Big 5 Sporting or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.65%
Values	Daily Returns

Big 5 Sporting  vs.  Guess Inc

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 uncertain performance in the last few months, the Stock's technical and fundamental indicators remain fairly stable which may send shares a bit higher in June 2024. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Guess Inc

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Guess Inc are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating technical and fundamental indicators, Guess unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Big 5 and Guess

The main advantage of trading using opposite Big 5 and Guess positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Big 5 position performs unexpectedly, Guess 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 Guess will offset losses from the drop in Guess' long position.

The idea behind Big 5 Sporting and Guess Inc 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.

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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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.