Correlation Between Big Lots and Amazon

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

Diversification Opportunities for Big Lots and Amazon

-0.33
  Correlation Coefficient

Very good diversification

The 3 months correlation between Big Lots and Amazon is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Big Lots and Amazon Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amazon Inc and Big Lots 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 Lots are associated (or correlated) with Amazon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amazon Inc has no effect on the direction of Big Lots i.e., Big Lots and Amazon go up and down completely randomly.

Pair Corralation between Big Lots and Amazon

Considering the 90-day investment horizon Big Lots is expected to under-perform the Amazon. In addition to that, Big Lots is 1.44 times more volatile than Amazon Inc. It trades about -0.09 of its total potential returns per unit of risk. Amazon Inc is currently generating about 0.14 per unit of volatility. If you would invest  11,081  in Amazon Inc on May 15, 2022 and sell it today you would earn a total of  3,274  from holding Amazon Inc or generate 29.55% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Big Lots  vs.  Amazon Inc

 Performance (%) 
       Timeline  
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 conflicting performance in the last few months, the Stock's forward indicators remain rather sound which may send shares a bit higher in September 2022. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Big Lots Price Channel

Amazon Inc 
Amazon Performance
10 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Amazon Inc are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady basic indicators, Amazon disclosed solid returns over the last few months and may actually be approaching a breakup point.

Amazon Price Channel

Big Lots and Amazon Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Big Lots and Amazon

The main advantage of trading using opposite Big Lots and Amazon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Big Lots position performs unexpectedly, Amazon 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 Amazon will offset losses from the drop in Amazon's long position.
The idea behind Big Lots and Amazon Inc 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.

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