Correlation Between Big Lots and Qurate Retail

Can any of the company-specific risk be diversified away by investing in both Big Lots and Qurate Retail 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 Big Lots and Qurate Retail into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Big Lots and Qurate Retail Series, you can compare the effects of market volatilities on Big Lots and Qurate Retail 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 Big Lots with a short position of Qurate Retail. Check out your portfolio center. Please also check ongoing floating volatility patterns of Big Lots and Qurate Retail.

Diversification Opportunities for Big Lots and Qurate Retail

-0.19

Correlation Coefficient

Big Lots  Qurate Retail

Good diversification

The 3 months correlation between Big and Qurate is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Big Lots and Qurate Retail Series in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Qurate Retail Series and Big Lots 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 Big Lots are associated (or correlated) with Qurate Retail. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Qurate Retail Series has no effect on the direction of Big Lots i.e., Big Lots and Qurate Retail go up and down completely randomly.

Pair Corralation between Big Lots and Qurate Retail

Considering the 90-day investment horizon Big Lots is expected to generate 1.29 times more return on investment than Qurate Retail. However, Big Lots is 1.29 times more volatile than Qurate Retail Series. It trades about -0.18 of its potential returns per unit of risk. Qurate Retail Series is currently generating about -0.38 per unit of risk. If you would invest  437.00  in Big Lots on January 30, 2024 and sell it today you would lose (75.50) from holding Big Lots or give up 17.28% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Big Lots  vs.  Qurate Retail Series

Big Lots

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Big Lots has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's forward indicators remain nearly stable which may send shares a bit higher in May 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Qurate Retail Series

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Qurate Retail Series are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, Qurate Retail sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Big Lots and Qurate Retail

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

The idea behind Big Lots and Qurate Retail Series 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.