Correlation Between Build-A-Bear Workshop and Neste Oyj

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Can any of the company-specific risk be diversified away by investing in both Build-A-Bear Workshop and Neste Oyj 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 Neste Oyj 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 Neste Oyj, you can compare the effects of market volatilities on Build-A-Bear Workshop and Neste Oyj 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 Neste Oyj. Check out your portfolio center. Please also check ongoing floating volatility patterns of Build-A-Bear Workshop and Neste Oyj.

Diversification Opportunities for Build-A-Bear Workshop and Neste Oyj

0.64
  Correlation Coefficient

Poor diversification

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

Pair Corralation between Build-A-Bear Workshop and Neste Oyj

Considering the 90-day investment horizon Build-A-Bear Workshop is expected to generate 2.72 times more return on investment than Neste Oyj. However, Build-A-Bear Workshop is 2.72 times more volatile than Neste Oyj. It trades about 0.35 of its potential returns per unit of risk. Neste Oyj is currently generating about 0.31 per unit of risk. If you would invest  1,764  in Build-A-Bear Workshop on September 6, 2022 and sell it today you would earn a total of  764.00  from holding Build-A-Bear Workshop or generate 43.31% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Build-A-Bear Workshop  vs.  Neste Oyj

 Performance (%) 
       Timeline  
Build-A-Bear Workshop 
Build-A-Bear Performance
22 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Build-A-Bear Workshop are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting fundamental drivers, Build-A-Bear Workshop showed solid returns over the last few months and may actually be approaching a breakup point.

Build-A-Bear Price Channel

Neste Oyj 
Neste Performance
3 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Neste Oyj are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady forward indicators, Neste Oyj may actually be approaching a critical reversion point that can send shares even higher in January 2023.

Neste Price Channel

Build-A-Bear Workshop and Neste Oyj Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Build-A-Bear Workshop and Neste Oyj

The main advantage of trading using opposite Build-A-Bear Workshop and Neste Oyj positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Build-A-Bear Workshop position performs unexpectedly, Neste Oyj 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 Neste Oyj will offset losses from the drop in Neste Oyj's long position.
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The idea behind Build-A-Bear Workshop and Neste Oyj 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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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 Anywhere module to track or share privately all of your investments from the convenience of any device.

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