Correlation Between Dicks Sporting and Under Armour
Can any of the company-specific risk be diversified away by investing in both Dicks Sporting and Under Armour 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 Under Armour 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 Under Armour C, you can compare the effects of market volatilities on Dicks Sporting and Under Armour 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 Under Armour. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dicks Sporting and Under Armour.
Diversification Opportunities for Dicks Sporting and Under Armour
-0.54 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Dicks and Under is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Dicks Sporting Goods and Under Armour C in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Under Armour C 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 Under Armour. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Under Armour C has no effect on the direction of Dicks Sporting i.e., Dicks Sporting and Under Armour go up and down completely randomly.
Pair Corralation between Dicks Sporting and Under Armour
Considering the 90-day investment horizon Dicks Sporting Goods is expected to under-perform the Under Armour. But the stock apears to be less risky and, when comparing its historical volatility, Dicks Sporting Goods is 1.2 times less risky than Under Armour. The stock trades about -0.47 of its potential returns per unit of risk. The Under Armour C is currently generating about -0.13 of returns per unit of risk over similar time horizon. If you would invest 683.00 in Under Armour C on January 23, 2024 and sell it today you would lose (27.00) from holding Under Armour C or give up 3.95% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dicks Sporting Goods vs. Under Armour C
Performance |
| Timeline |
| Dicks Sporting Goods |
| Under Armour C |
Dicks Sporting and Under Armour Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dicks Sporting and Under Armour
The main advantage of trading using opposite Dicks Sporting and Under Armour positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dicks Sporting position performs unexpectedly, Under Armour 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 Under Armour will offset losses from the drop in Under Armour's long position.The idea behind Dicks Sporting Goods and Under Armour C 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 CEOs Directory module to screen CEOs from public companies around the world.
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