Correlation Between Barnes Noble and Best Buy

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

Diversification Opportunities for Barnes Noble and Best Buy

0.06
  Correlation Coefficient

Significant diversification

The 3 months correlation between Barnes and Best Buy is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Barnes Noble Education and Best Buy Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Best Buy and Barnes Noble 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 Barnes Noble Education are associated (or correlated) with Best Buy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Best Buy has no effect on the direction of Barnes Noble i.e., Barnes Noble and Best Buy go up and down completely randomly.

Pair Corralation between Barnes Noble and Best Buy

Given the investment horizon of 90 days Barnes Noble Education is expected to generate 1.97 times more return on investment than Best Buy. However, Barnes Noble is 1.97 times more volatile than Best Buy Company. It trades about 0.02 of its potential returns per unit of risk. Best Buy Company is currently generating about -0.03 per unit of risk. If you would invest  256.00  in Barnes Noble Education on June 28, 2022 and sell it today you would lose (37.00)  from holding Barnes Noble Education or give up 14.45% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Barnes Noble Education  vs.  Best Buy Company

 Performance (%) 
       Timeline  
Barnes Noble Education 
Barnes Performance
0 of 100
Over the last 90 days Barnes Noble Education has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in October 2022. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Barnes Price Channel

Best Buy 
Best Buy Performance
1 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Best Buy Company are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong fundamental drivers, Best Buy is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Best Buy Price Channel

Barnes Noble and Best Buy Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Barnes Noble and Best Buy

The main advantage of trading using opposite Barnes Noble and Best Buy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Barnes Noble position performs unexpectedly, Best Buy 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 Best Buy will offset losses from the drop in Best Buy's long position.
Barnes Noble vs. Clearwater Paper Corp
The idea behind Barnes Noble Education and Best Buy Company 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.
Best Buy vs. Clearwater Paper Corp
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.

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