Correlation Between Aarons and Best Buy

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Can any of the company-specific risk be diversified away by investing in both Aarons 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 Aarons and Best Buy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aarons Inc and Best Buy Co, you can compare the effects of market volatilities on Aarons 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 Aarons with a short position of Best Buy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aarons and Best Buy.

Diversification Opportunities for Aarons and Best Buy

0.86
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Aarons and Best Buy is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Aarons Inc and Best Buy Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Best Buy and Aarons 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 Aarons Inc 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 Aarons i.e., Aarons and Best Buy go up and down completely randomly.

Pair Corralation between Aarons and Best Buy

Considering the 90-day investment horizon Aarons Inc is expected to generate 1.44 times more return on investment than Best Buy. However, Aarons is 1.44 times more volatile than Best Buy Co. It trades about 0.0 of its potential returns per unit of risk. Best Buy Co is currently generating about -0.01 per unit of risk. If you would invest  1,872  in Aarons Inc on October 30, 2022 and sell it today you would lose (439.00)  from holding Aarons Inc or give up 23.45% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Aarons Inc  vs.  Best Buy Co

 Performance (%) 
       Timeline  
Aarons Inc 
Aarons Performance
15 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Aarons Inc are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Aarons disclosed solid returns over the last few months and may actually be approaching a breakup point.

Aarons Price Channel

Best Buy 
Best Buy Performance
11 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Best Buy Co are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating fundamental drivers, Best Buy showed solid returns over the last few months and may actually be approaching a breakup point.

Best Buy Price Channel

Aarons and Best Buy Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Aarons and Best Buy

The main advantage of trading using opposite Aarons and Best Buy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aarons 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.
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The idea behind Aarons Inc and Best Buy Co 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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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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.

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