Correlation Between Bed Bath and Conns

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

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

Diversification Opportunities for Bed Bath and Conns

0.28

Correlation Coefficient

Bed Bath  Conns

Modest diversification

The 3 months correlation between Bed and Conns is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Bed Bath Beyond and Conns Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Conns Inc and Bed Bath 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 Bed Bath Beyond are associated (or correlated) with Conns. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Conns Inc has no effect on the direction of Bed Bath i.e., Bed Bath and Conns go up and down completely randomly.

Pair Corralation between Bed Bath and Conns

Given the investment horizon of 90 days Bed Bath Beyond is expected to under-perform the Conns. In addition to that, Bed Bath is 2.76 times more volatile than Conns Inc. It trades about -0.02 of its total potential returns per unit of risk. Conns Inc is currently generating about -0.03 per unit of volatility. If you would invest  1,544  in Conns Inc on January 26, 2024 and sell it today you would lose (1,162) from holding Conns Inc or give up 75.26% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	58.91%
Values	Daily Returns

Bed Bath Beyond  vs.  Conns Inc

Bed Bath Beyond

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bed Bath Beyond has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong fundamental drivers, Bed Bath is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Conns Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Conns Inc 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 basic indicators remain very healthy which may send shares a bit higher in May 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Bed Bath and Conns

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

The idea behind Bed Bath Beyond and Conns 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.