Correlation Between Bed Bath and Big Lots

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

Diversification Opportunities for Bed Bath and Big Lots

0.64
  Correlation Coefficient

Poor diversification

The 3 months correlation between Bed Bath and Big Lots is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Bed Bath Beyond and Big Lots in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Big Lots and Bed Bath 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 Bed Bath Beyond are associated (or correlated) with Big Lots. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Big Lots has no effect on the direction of Bed Bath i.e., Bed Bath and Big Lots go up and down completely randomly.

Pair Corralation between Bed Bath and Big Lots

Given the investment horizon of 90 days Bed Bath Beyond is expected to generate 2.11 times more return on investment than Big Lots. However, Bed Bath is 2.11 times more volatile than Big Lots. It trades about -0.01 of its potential returns per unit of risk. Big Lots is currently generating about -0.06 per unit of risk. If you would invest  2,778  in Bed Bath Beyond on July 8, 2022 and sell it today you would lose (2,181)  from holding Bed Bath Beyond or give up 78.51% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Bed Bath Beyond  vs.  Big Lots

 Performance (%) 
       Timeline  
Bed Bath Beyond 
Bed Bath Performance
6 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Bed Bath Beyond are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental drivers, Bed Bath showed solid returns over the last few months and may actually be approaching a breakup point.

Bed Bath Price Channel

Big Lots 
Big Lots Performance
0 of 100
Over the last 90 days Big Lots has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's forward indicators remain rather sound which may send shares a bit higher in November 2022. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Big Lots Price Channel

Bed Bath and Big Lots Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Bed Bath and Big Lots

The main advantage of trading using opposite Bed Bath and Big Lots positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bed Bath position performs unexpectedly, Big Lots 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 Big Lots will offset losses from the drop in Big Lots' long position.
Bed Bath vs. Best Buy Company
The idea behind Bed Bath Beyond and Big Lots 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.
Big Lots vs. Amazon Inc
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.

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