Correlation Between Big Lots and Build-A-Bear Workshop

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

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

0.51
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Big Lots and Build-A-Bear is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Big Lots and Build-A-Bear Workshop in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Build-A-Bear Workshop 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 Build-A-Bear Workshop. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Build-A-Bear Workshop has no effect on the direction of Big Lots i.e., Big Lots and Build-A-Bear Workshop go up and down completely randomly.

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

Considering the 90-day investment horizon Big Lots is expected to under-perform the Build-A-Bear Workshop. In addition to that, Big Lots is 1.48 times more volatile than Build-A-Bear Workshop. It trades about -0.04 of its total potential returns per unit of risk. Build-A-Bear Workshop is currently generating about 0.19 per unit of volatility. If you would invest  1,478  in Build-A-Bear Workshop on May 12, 2022 and sell it today you would earn a total of  159.00  from holding Build-A-Bear Workshop or generate 10.76% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Big Lots  vs.  Build-A-Bear Workshop

 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 uncertain 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

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 fairly stable fundamental drivers, Build-A-Bear Workshop is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Build-A-Bear Price Channel

Big Lots and Build-A-Bear Workshop Volatility Contrast

   Predicted Return Density   
       Returns  

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

The main advantage of trading using opposite Big Lots and Build-A-Bear Workshop positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Big Lots position performs unexpectedly, Build-A-Bear Workshop 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 Build-A-Bear Workshop will offset losses from the drop in Build-A-Bear Workshop's long position.
The idea behind Big Lots and Build-A-Bear Workshop 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.

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