Correlation Between Big 5 and Omnia Wellness

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Can any of the company-specific risk be diversified away by investing in both Big 5 and Omnia Wellness 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 Omnia Wellness 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 Omnia Wellness, you can compare the effects of market volatilities on Big 5 and Omnia Wellness 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 Omnia Wellness. Check out your portfolio center. Please also check ongoing floating volatility patterns of Big 5 and Omnia Wellness.

Diversification Opportunities for Big 5 and Omnia Wellness

-0.65
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Big 5 and Omnia is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Big 5 Sporting and Omnia Wellness in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Omnia Wellness 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 Omnia Wellness. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Omnia Wellness has no effect on the direction of Big 5 i.e., Big 5 and Omnia Wellness go up and down completely randomly.

Pair Corralation between Big 5 and Omnia Wellness

Given the investment horizon of 90 days Big 5 Sporting is expected to generate 0.2 times more return on investment than Omnia Wellness. However, Big 5 Sporting is 5.05 times less risky than Omnia Wellness. It trades about 0.13 of its potential returns per unit of risk. Omnia Wellness is currently generating about 0.01 per unit of risk. If you would invest  1,134  in Big 5 Sporting on May 19, 2022 and sell it today you would earn a total of  285.00  from holding Big 5 Sporting or generate 25.13% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy97.56%
ValuesDaily Returns

Big 5 Sporting  vs.  Omnia Wellness

 Performance (%) 
       Timeline  
Big 5 Sporting 
Big 5 Performance
6 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Big 5 Sporting are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, Big 5 showed solid returns over the last few months and may actually be approaching a breakup point.

Big 5 Price Channel

Omnia Wellness 
Omnia Performance
6 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Omnia Wellness are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively sluggish basic indicators, Omnia Wellness reported solid returns over the last few months and may actually be approaching a breakup point.

Omnia Price Channel

Big 5 and Omnia Wellness Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Big 5 and Omnia Wellness

The main advantage of trading using opposite Big 5 and Omnia Wellness positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Big 5 position performs unexpectedly, Omnia Wellness 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 Omnia Wellness will offset losses from the drop in Omnia Wellness' long position.
The idea behind Big 5 Sporting and Omnia Wellness 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.

Omnia Wellness

Pair trading matchups for Omnia Wellness

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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.

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