Correlation Between Buckle and Bath Body

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

By analyzing existing cross correlation between Buckle Inc and Bath Body Works, you can compare the effects of market volatilities on Buckle and Bath Body 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 Buckle with a short position of Bath Body. Check out your portfolio center. Please also check ongoing floating volatility patterns of Buckle and Bath Body.

Diversification Opportunities for Buckle and Bath Body

0.11

Correlation Coefficient

Buckle  Bath Body

Average diversification

The 3 months correlation between Buckle and Bath is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Buckle Inc and Bath Body Works in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bath Body Works and Buckle 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 Buckle Inc are associated (or correlated) with Bath Body. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bath Body Works has no effect on the direction of Buckle i.e., Buckle and Bath Body go up and down completely randomly.

Pair Corralation between Buckle and Bath Body

Considering the 90-day investment horizon Buckle Inc is expected to generate 0.49 times more return on investment than Bath Body. However, Buckle Inc is 2.03 times less risky than Bath Body. It trades about 0.25 of its potential returns per unit of risk. Bath Body Works is currently generating about -0.32 per unit of risk. If you would invest  4,661  in Buckle Inc on May 5, 2025 and sell it today you would earn a total of  262.00  from holding Buckle Inc or generate 5.62% return on investment over 90 days.

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

Buckle Inc  vs.  Bath Body Works

Buckle Inc

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Buckle Inc are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting forward-looking signals, Buckle exhibited solid returns over the last few months and may actually be approaching a breakup point.

Bath Body Works

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bath Body Works has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Bath Body is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Buckle and Bath Body

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

The idea behind Buckle Inc and Bath Body Works 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.