Correlation Between Bath Body and Barnes Noble

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

By analyzing existing cross correlation between Bath Body Works and Barnes Noble Education, you can compare the effects of market volatilities on Bath Body and Barnes Noble 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 Bath Body with a short position of Barnes Noble. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bath Body and Barnes Noble.

Diversification Opportunities for Bath Body and Barnes Noble

0.03

Correlation Coefficient

Bath Body  Barnes Noble

Significant diversification

The 3 months correlation between Bath and Barnes is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Bath Body Works and Barnes Noble Education in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Barnes Noble Education and Bath Body 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 Bath Body Works are associated (or correlated) with Barnes Noble. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Barnes Noble Education has no effect on the direction of Bath Body i.e., Bath Body and Barnes Noble go up and down completely randomly.

Pair Corralation between Bath Body and Barnes Noble

Given the investment horizon of 90 days Bath Body Works is expected to generate 0.14 times more return on investment than Barnes Noble. However, Bath Body Works is 7.3 times less risky than Barnes Noble. It trades about 0.05 of its potential returns per unit of risk. Barnes Noble Education is currently generating about -0.24 per unit of risk. If you would invest  4,517  in Bath Body Works on February 4, 2024 and sell it today you would earn a total of  80.00  from holding Bath Body Works or generate 1.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Bath Body Works  vs.  Barnes Noble Education

Bath Body Works

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Bath Body Works are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain basic indicators, Bath Body may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Barnes Noble Education

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Barnes Noble Education 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 rather sound which may send shares a bit higher in June 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Bath Body and Barnes Noble

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

The idea behind Bath Body Works and Barnes Noble Education 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.