Correlation Between Big Lots and Big 5

Can any of the company-specific risk be diversified away by investing in both Big Lots and Big 5 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 Big Lots and Big 5 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Big Lots and Big 5 Sporting, you can compare the effects of market volatilities on Big Lots and Big 5 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 Big Lots with a short position of Big 5. Check out your portfolio center. Please also check ongoing floating volatility patterns of Big Lots and Big 5.

Diversification Opportunities for Big Lots and Big 5

0.86

Correlation Coefficient

Big Lots  Big 5

Very poor diversification

The 3 months correlation between Big and Big is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Big Lots and Big 5 Sporting in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Big 5 Sporting and Big Lots 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 Big Lots are associated (or correlated) with Big 5. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Big 5 Sporting has no effect on the direction of Big Lots i.e., Big Lots and Big 5 go up and down completely randomly.

Pair Corralation between Big Lots and Big 5

Considering the 90-day investment horizon Big Lots is expected to under-perform the Big 5. In addition to that, Big Lots is 1.71 times more volatile than Big 5 Sporting. It trades about -0.07 of its total potential returns per unit of risk. Big 5 Sporting is currently generating about -0.08 per unit of volatility. If you would invest  402.00  in Big 5 Sporting on March 7, 2024 and sell it today you would lose (79.00) from holding Big 5 Sporting or give up 19.65% of portfolio value over 90 days.

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

Big Lots  vs.  Big 5 Sporting

Big Lots

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Big Lots has generated negative risk-adjusted returns adding no value to investors with long positions. Despite sluggish performance in the last few months, the Stock's forward indicators remain nearly stable which may send shares a bit higher in July 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Big 5 Sporting

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Big 5 Sporting 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 fairly stable which may send shares a bit higher in July 2024. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Big Lots and Big 5

The main advantage of trading using opposite Big Lots and Big 5 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Big Lots position performs unexpectedly, Big 5 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 Big 5 will offset losses from the drop in Big 5's long position.

The idea behind Big Lots and Big 5 Sporting 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.