Correlation Between Floor Decor and Best Buy
Can any of the company-specific risk be diversified away by investing in both Floor Decor and Best Buy 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 Floor Decor and Best Buy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Floor Decor Holdings and Best Buy Co, you can compare the effects of market volatilities on Floor Decor and Best Buy 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 Floor Decor with a short position of Best Buy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Floor Decor and Best Buy.
Diversification Opportunities for Floor Decor and Best Buy
0.53 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Floor and Best is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Floor Decor Holdings and Best Buy Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Best Buy and Floor Decor 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 Floor Decor Holdings are associated (or correlated) with Best Buy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Best Buy has no effect on the direction of Floor Decor i.e., Floor Decor and Best Buy go up and down completely randomly.
Pair Corralation between Floor Decor and Best Buy
Considering the 90-day investment horizon Floor Decor is expected to generate 73.82 times less return on investment than Best Buy. But when comparing it to its historical volatility, Floor Decor Holdings is 1.95 times less risky than Best Buy. It trades about 0.01 of its potential returns per unit of risk. Best Buy Co is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 7,440 in Best Buy Co on March 5, 2024 and sell it today you would earn a total of 1,042 from holding Best Buy Co or generate 14.01% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Floor Decor Holdings vs. Best Buy Co
Performance |
Timeline |
Floor Decor Holdings |
Best Buy |
Floor Decor and Best Buy Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Floor Decor and Best Buy
The main advantage of trading using opposite Floor Decor and Best Buy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Floor Decor position performs unexpectedly, Best Buy 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 Best Buy will offset losses from the drop in Best Buy's long position.Floor Decor vs. Arhaus Inc | Floor Decor vs. Haverty Furniture Companies | Floor Decor vs. Kirklands | Floor Decor vs. Live Ventures |
Best Buy vs. RH | Best Buy vs. Dicks Sporting Goods | Best Buy vs. AutoZone | Best Buy vs. Pet Acquisition LLC |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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