Correlation Between Nitori Holdings and Best Buy

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

By analyzing existing cross correlation between Nitori Holdings Co and Best Buy Co, you can compare the effects of market volatilities on Nitori Holdings and Best Buy 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 Nitori Holdings with a short position of Best Buy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nitori Holdings and Best Buy.

Diversification Opportunities for Nitori Holdings and Best Buy

0.66

Correlation Coefficient

Nitori Holdings  Best Buy

Poor diversification

The 3 months correlation between Nitori and Best is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Nitori Holdings Co and Best Buy Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Best Buy and Nitori Holdings 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 Nitori Holdings Co are associated (or correlated) with Best Buy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Best Buy has no effect on the direction of Nitori Holdings i.e., Nitori Holdings and Best Buy go up and down completely randomly.

Pair Corralation between Nitori Holdings and Best Buy

Assuming the 90 days horizon Nitori Holdings Co is expected to under-perform the Best Buy. In addition to that, Nitori Holdings is 1.71 times more volatile than Best Buy Co. It trades about -0.22 of its total potential returns per unit of risk. Best Buy Co is currently generating about -0.25 per unit of volatility. If you would invest  8,072  in Best Buy Co on January 25, 2024 and sell it today you would lose (644.00) from holding Best Buy Co or give up 7.98% of portfolio value over 90 days.

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

Nitori Holdings Co  vs.  Best Buy Co

Nitori Holdings

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nitori Holdings Co are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting basic indicators, Nitori Holdings reported solid returns over the last few months and may actually be approaching a breakup point.

Best Buy

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Best Buy Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong fundamental drivers, Best Buy is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Nitori Holdings and Best Buy

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

The idea behind Nitori Holdings Co and Best Buy Co 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.