Correlation Between BIP Bermuda and Dicks Sporting

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

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

Diversification Opportunities for BIP Bermuda and Dicks Sporting

0.69

Correlation Coefficient

BIP Bermuda  Dicks Sporting

Poor diversification

The 3 months correlation between BIP and Dicks is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding BIP Bermuda Holdings and Dicks Sporting Goods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dicks Sporting Goods and BIP Bermuda 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 BIP Bermuda Holdings are associated (or correlated) with Dicks Sporting. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dicks Sporting Goods has no effect on the direction of BIP Bermuda i.e., BIP Bermuda and Dicks Sporting go up and down completely randomly.

Pair Corralation between BIP Bermuda and Dicks Sporting

Given the investment horizon of 90 days BIP Bermuda is expected to generate 4.3 times less return on investment than Dicks Sporting. But when comparing it to its historical volatility, BIP Bermuda Holdings is 1.59 times less risky than Dicks Sporting. It trades about 0.09 of its potential returns per unit of risk. Dicks Sporting Goods is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  10,466  in Dicks Sporting Goods on January 20, 2024 and sell it today you would earn a total of  9,042  from holding Dicks Sporting Goods or generate 86.39% return on investment over 90 days.

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

BIP Bermuda Holdings  vs.  Dicks Sporting Goods

BIP Bermuda Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BIP Bermuda Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, BIP Bermuda is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Dicks Sporting Goods

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dicks Sporting Goods are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak forward-looking signals, Dicks Sporting unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BIP Bermuda and Dicks Sporting

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

The idea behind BIP Bermuda Holdings and Dicks Sporting Goods 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.