Correlation Between Dicks Sporting and BIP Bermuda

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

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

Diversification Opportunities for Dicks Sporting and BIP Bermuda

0.65

Correlation Coefficient

Dicks Sporting  BIP Bermuda

Poor diversification

The 3 months correlation between Dicks and BIP is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Dicks Sporting Goods and BIP Bermuda Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BIP Bermuda Holdings and Dicks Sporting 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 Dicks Sporting Goods are associated (or correlated) with BIP Bermuda. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BIP Bermuda Holdings has no effect on the direction of Dicks Sporting i.e., Dicks Sporting and BIP Bermuda go up and down completely randomly.

Pair Corralation between Dicks Sporting and BIP Bermuda

Considering the 90-day investment horizon Dicks Sporting Goods is expected to generate 0.96 times more return on investment than BIP Bermuda. However, Dicks Sporting Goods is 1.04 times less risky than BIP Bermuda. It trades about -0.16 of its potential returns per unit of risk. BIP Bermuda Holdings is currently generating about -0.17 per unit of risk. If you would invest  21,744  in Dicks Sporting Goods on January 26, 2024 and sell it today you would lose (1,196) from holding Dicks Sporting Goods or give up 5.5% of portfolio value over 90 days.

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

Dicks Sporting Goods  vs.  BIP Bermuda Holdings

Dicks Sporting Goods

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Dicks Sporting Goods are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain forward-looking signals, Dicks Sporting unveiled solid returns over the last few months and may actually be approaching a breakup point.

BIP Bermuda Holdings

Risk-Adjusted Performance

0 of 100

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 recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Dicks Sporting and BIP Bermuda

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

The idea behind Dicks Sporting Goods and BIP Bermuda Holdings 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.