Correlation Between Dicks Sporting and Lands End
Can any of the company-specific risk be diversified away by investing in both Dicks Sporting and Lands End 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 Lands End 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 Lands End, you can compare the effects of market volatilities on Dicks Sporting and Lands End 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 Lands End. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dicks Sporting and Lands End.
Diversification Opportunities for Dicks Sporting and Lands End
0.36 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Dicks and Lands is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Dicks Sporting Goods and Lands End in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lands End 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 Lands End. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lands End has no effect on the direction of Dicks Sporting i.e., Dicks Sporting and Lands End go up and down completely randomly.
Pair Corralation between Dicks Sporting and Lands End
Considering the 90-day investment horizon Dicks Sporting Goods is expected to under-perform the Lands End. But the stock apears to be less risky and, when comparing its historical volatility, Dicks Sporting Goods is 2.7 times less risky than Lands End. The stock trades about -0.18 of its potential returns per unit of risk. The Lands End is currently generating about 0.5 of returns per unit of risk over similar time horizon. If you would invest 900.00 in Lands End on January 25, 2024 and sell it today you would earn a total of 473.00 from holding Lands End or generate 52.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dicks Sporting Goods vs. Lands End
Performance |
| Timeline |
| Dicks Sporting Goods |
| Lands End |
Dicks Sporting and Lands End Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dicks Sporting and Lands End
The main advantage of trading using opposite Dicks Sporting and Lands End positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dicks Sporting position performs unexpectedly, Lands End 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 Lands End will offset losses from the drop in Lands End's long position.The idea behind Dicks Sporting Goods and Lands End 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.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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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