Correlation Between Big 5 and Big Lots

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Can any of the company-specific risk be diversified away by investing in both Big 5 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 Big 5 and Big Lots into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Big 5 Sporting and Big Lots, you can compare the effects of market volatilities on Big 5 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 Big 5 with a short position of Big Lots. Check out your portfolio center. Please also check ongoing floating volatility patterns of Big 5 and Big Lots.

Diversification Opportunities for Big 5 and Big Lots

0.54
  Correlation Coefficient

Very weak diversification

The 1 month correlation between Big 5 and Big Lots is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Big 5 Sporting and Big Lots in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Big Lots and Big 5 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 Big 5 Sporting 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 Big 5 i.e., Big 5 and Big Lots go up and down completely randomly.

Pair Corralation between Big 5 and Big Lots

Given the investment horizon of 90 days Big 5 Sporting is expected to generate 0.7 times more return on investment than Big Lots. However, Big 5 Sporting is 1.42 times less risky than Big Lots. It trades about -0.12 of its potential returns per unit of risk. Big Lots is currently generating about -0.16 per unit of risk. If you would invest  1,490  in Big 5 Sporting on March 26, 2022 and sell it today you would lose (286.00)  from holding Big 5 Sporting or give up 19.19% of portfolio value over 90 days.
Time Period1 Month [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Big 5 Sporting  vs.  Big Lots

 Performance (%) 
      Timeline 
Big 5 Sporting 
Big 5 Performance
0 of 100
Over the last 90 days Big 5 Sporting has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Structure and Payout Changes

Forward Annual Dividend Yield
0.0882
Payout Ratio
0.44
Forward Annual Dividend Rate
1.0
Dividend Date
2022-06-15
Ex Dividend Date
2022-05-31

Big 5 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 weak performance in the last few months, the Stock's forward indicators remain rather sound which may send shares a bit higher in July 2022. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Structure and Payout Changes

Forward Annual Dividend Yield
0.0567
Payout Ratio
0.52
Last Split Factor
5:4
Forward Annual Dividend Rate
1.2
Dividend Date
2022-06-24
Ex Dividend Date
2022-06-09
Last Split Date
1997-06-25

Big Lots Price Channel

Big 5 and Big Lots Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with Big 5 and Big Lots

The main advantage of trading using opposite Big 5 and Big Lots positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Big 5 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.
The idea behind Big 5 Sporting 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.
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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.

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