Correlation Between Five Below and Interface

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

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

Diversification Opportunities for Five Below and Interface

0.76

Correlation Coefficient

Five Below  Interface

Poor diversification

The 3 months correlation between Five and Interface is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Five Below and Interface in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Interface and Five Below 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 Five Below are associated (or correlated) with Interface. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Interface has no effect on the direction of Five Below i.e., Five Below and Interface go up and down completely randomly.

Pair Corralation between Five Below and Interface

Given the investment horizon of 90 days Five Below is expected to generate 2.03 times more return on investment than Interface. However, Five Below is 2.03 times more volatile than Interface. It trades about 0.28 of its potential returns per unit of risk. Interface is currently generating about 0.11 per unit of risk. If you would invest  7,589  in Five Below on April 30, 2025 and sell it today you would earn a total of  6,352  from holding Five Below or generate 83.7% return on investment over 90 days.

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

Five Below  vs.  Interface

Five Below

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Five Below are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Five Below exhibited solid returns over the last few months and may actually be approaching a breakup point.

Interface

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Interface are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting essential indicators, Interface exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Five Below and Interface

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

The idea behind Five Below and Interface 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.