Correlation Between Bed Bath and National Vision

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Can any of the company-specific risk be diversified away by investing in both Bed Bath and National Vision 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 National Vision 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 National Vision Holdings, you can compare the effects of market volatilities on Bed Bath and National Vision 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 National Vision. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bed Bath and National Vision.

Diversification Opportunities for Bed Bath and National Vision

0.64
  Correlation Coefficient

Poor diversification

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

Pair Corralation between Bed Bath and National Vision

Given the investment horizon of 90 days Bed Bath Beyond is expected to generate 2.41 times more return on investment than National Vision. However, Bed Bath is 2.41 times more volatile than National Vision Holdings. It trades about -0.01 of its potential returns per unit of risk. National Vision Holdings is currently generating about -0.02 per unit of risk. If you would invest  2,893  in Bed Bath Beyond on May 21, 2022 and sell it today you would lose (1,790)  from holding Bed Bath Beyond or give up 61.87% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Bed Bath Beyond  vs.  National Vision Holdings

 Performance (%) 
       Timeline  
Bed Bath Beyond 
Bed Bath Performance
7 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Bed Bath Beyond are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating fundamental drivers, Bed Bath showed solid returns over the last few months and may actually be approaching a breakup point.

Bed Bath Price Channel

National Vision Holdings 
National Performance
10 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in National Vision Holdings are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating basic indicators, National Vision exhibited solid returns over the last few months and may actually be approaching a breakup point.

National Price Channel

Bed Bath and National Vision Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Bed Bath and National Vision

The main advantage of trading using opposite Bed Bath and National Vision positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bed Bath position performs unexpectedly, National Vision 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 National Vision will offset losses from the drop in National Vision's long position.
The idea behind Bed Bath Beyond and National Vision Holdings 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .

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