Correlation Between Boot Barn and ZhongAn Online

Can any of the company-specific risk be diversified away by investing in both Boot Barn and ZhongAn Online 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 Boot Barn and ZhongAn Online into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Boot Barn Holdings and ZhongAn Online P, you can compare the effects of market volatilities on Boot Barn and ZhongAn Online 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 Boot Barn with a short position of ZhongAn Online. Check out your portfolio center. Please also check ongoing floating volatility patterns of Boot Barn and ZhongAn Online.

Diversification Opportunities for Boot Barn and ZhongAn Online

-0.25

Correlation Coefficient

Boot Barn  ZhongAn Online

Very good diversification

The 3 months correlation between Boot and ZhongAn is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Boot Barn Holdings and ZhongAn Online P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ZhongAn Online P and Boot Barn 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 Boot Barn Holdings are associated (or correlated) with ZhongAn Online. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ZhongAn Online P has no effect on the direction of Boot Barn i.e., Boot Barn and ZhongAn Online go up and down completely randomly.

Pair Corralation between Boot Barn and ZhongAn Online

Given the investment horizon of 90 days Boot Barn Holdings is expected to generate 1.03 times more return on investment than ZhongAn Online. However, Boot Barn is 1.03 times more volatile than ZhongAn Online P. It trades about 0.18 of its potential returns per unit of risk. ZhongAn Online P is currently generating about -0.15 per unit of risk. If you would invest  8,984  in Boot Barn Holdings on February 5, 2024 and sell it today you would earn a total of  1,546  from holding Boot Barn Holdings or generate 17.21% return on investment over 90 days.

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

Boot Barn Holdings  vs.  ZhongAn Online P

Boot Barn Holdings

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Boot Barn Holdings are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Boot Barn unveiled solid returns over the last few months and may actually be approaching a breakup point.

ZhongAn Online P

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ZhongAn Online P has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in June 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Boot Barn and ZhongAn Online

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

The idea behind Boot Barn Holdings and ZhongAn Online P 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.