Correlation Between Dicks Sporting and EBay
Can any of the company-specific risk be diversified away by investing in both Dicks Sporting and EBay 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 EBay 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 EBay Inc, you can compare the effects of market volatilities on Dicks Sporting and EBay 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 EBay. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dicks Sporting and EBay.
Diversification Opportunities for Dicks Sporting and EBay
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Dicks and EBay is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Dicks Sporting Goods and EBay Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EBay Inc 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 EBay. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EBay Inc has no effect on the direction of Dicks Sporting i.e., Dicks Sporting and EBay go up and down completely randomly.
Pair Corralation between Dicks Sporting and EBay
Considering the 90-day investment horizon Dicks Sporting Goods is expected to generate 2.66 times more return on investment than EBay. However, Dicks Sporting is 2.66 times more volatile than EBay Inc. It trades about 0.33 of its potential returns per unit of risk. EBay Inc is currently generating about 0.36 per unit of risk. If you would invest 17,658 in Dicks Sporting Goods on December 30, 2023 and sell it today you would earn a total of 4,828 from holding Dicks Sporting Goods or generate 27.34% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Dicks Sporting Goods vs. EBay Inc
Performance |
Timeline |
Dicks Sporting Goods |
EBay Inc |
Dicks Sporting and EBay Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Dicks Sporting and EBay
The main advantage of trading using opposite Dicks Sporting and EBay positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dicks Sporting position performs unexpectedly, EBay 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 EBay will offset losses from the drop in EBay's long position.Dicks Sporting vs. World Houseware Limited | Dicks Sporting vs. Inter Parfums | Dicks Sporting vs. Omni Health | Dicks Sporting vs. Estee Lauder Companies |
Check out your portfolio center.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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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