Correlation Between Build-A-Bear Workshop and Big Lots

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

Diversification Opportunities for Build-A-Bear Workshop and Big Lots

0.63
  Correlation Coefficient

Poor diversification

The 3 months correlation between Build-A-Bear and Big Lots is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Build-A-Bear Workshop and Big Lots in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Big Lots and Build-A-Bear Workshop 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 Build-A-Bear Workshop 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 Build-A-Bear Workshop i.e., Build-A-Bear Workshop and Big Lots go up and down completely randomly.

Pair Corralation between Build-A-Bear Workshop and Big Lots

Considering the 90-day investment horizon Build-A-Bear Workshop is expected to generate 1.47 times more return on investment than Big Lots. However, Build-A-Bear Workshop is 1.47 times more volatile than Big Lots. It trades about 0.08 of its potential returns per unit of risk. Big Lots is currently generating about -0.03 per unit of risk. If you would invest  274.00  in Build-A-Bear Workshop on June 30, 2022 and sell it today you would earn a total of  1,058  from holding Build-A-Bear Workshop or generate 386.13% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Build-A-Bear Workshop  vs.  Big Lots

 Performance (%) 
       Timeline  
Build-A-Bear Workshop 
Build-A-Bear Performance
0 of 100
Over the last 90 days Build-A-Bear Workshop has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's fundamental drivers remain fairly stable which may send shares a bit higher in October 2022. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Build-A-Bear 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 latest weak performance, the Stock's forward indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Big Lots Price Channel

Build-A-Bear Workshop and Big Lots Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Build-A-Bear Workshop and Big Lots

The main advantage of trading using opposite Build-A-Bear Workshop and Big Lots positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Build-A-Bear Workshop 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.
Build-A-Bear Workshop vs. Clearwater Paper Corp
The idea behind Build-A-Bear Workshop 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. Kibush Capital Corp
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.

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