Correlation Between Aarons Holdings and Bed Bath

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Can any of the company-specific risk be diversified away by investing in both Aarons Holdings and Bed Bath 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 Aarons Holdings and Bed Bath into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aarons Holdings and Bed Bath Beyond, you can compare the effects of market volatilities on Aarons Holdings and Bed Bath 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 Aarons Holdings with a short position of Bed Bath. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aarons Holdings and Bed Bath.

Diversification Opportunities for Aarons Holdings and Bed Bath

0.87
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Aarons and Bed Bath is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Aarons Holdings and Bed Bath Beyond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bed Bath Beyond and Aarons Holdings 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 Aarons Holdings are associated (or correlated) with Bed Bath. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bed Bath Beyond has no effect on the direction of Aarons Holdings i.e., Aarons Holdings and Bed Bath go up and down completely randomly.

Pair Corralation between Aarons Holdings and Bed Bath

Considering the 90-day investment horizon Aarons Holdings is expected to under-perform the Bed Bath. But the stock apears to be less risky and, when comparing its historical volatility, Aarons Holdings is 2.47 times less risky than Bed Bath. The stock trades about -0.02 of its potential returns per unit of risk. The Bed Bath Beyond is currently generating about 0.39 of returns per unit of risk over similar time horizon. If you would invest  480.00  in Bed Bath Beyond on May 10, 2022 and sell it today you would earn a total of  647.00  from holding Bed Bath Beyond or generate 134.79% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Aarons Holdings  vs.  Bed Bath Beyond

 Performance (%) 
       Timeline  
Aarons Holdings 
Aarons Performance
0 of 100
Over the last 90 days Aarons Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in September 2022. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Aarons Price Channel

Bed Bath Beyond 
Bed Bath Performance
4 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Bed Bath Beyond are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady fundamental drivers, Bed Bath showed solid returns over the last few months and may actually be approaching a breakup point.

Bed Bath Price Channel

Aarons Holdings and Bed Bath Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Aarons Holdings and Bed Bath

The main advantage of trading using opposite Aarons Holdings and Bed Bath positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aarons Holdings position performs unexpectedly, Bed Bath 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 Bed Bath will offset losses from the drop in Bed Bath's long position.
The idea behind Aarons Holdings and Bed Bath Beyond 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.

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