Correlation Between Build A and Bed Bath

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

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

Diversification Opportunities for Build A and Bed Bath

-0.14

Correlation Coefficient

Build A  Bed Bath

Good diversification

The 3 months correlation between Build and Bed is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Build A Bear Workshop and Bed Bath Beyond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bed Bath Beyond and Build A 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 Build A Bear Workshop are associated (or correlated) with Bed Bath. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bed Bath Beyond has no effect on the direction of Build A i.e., Build A and Bed Bath go up and down completely randomly.

Pair Corralation between Build A and Bed Bath

If you would invest  2,898  in Build A Bear Workshop on January 25, 2024 and sell it today you would earn a total of  31.00  from holding Build A Bear Workshop or generate 1.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	4.55%
Values	Daily Returns

Build A Bear Workshop  vs.  Bed Bath Beyond

Build A Bear

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Build A Bear Workshop are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating fundamental drivers, Build A showed solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Build A and Bed Bath

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

The idea behind Build A Bear Workshop and Bed Bath Beyond 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .