Correlation Between Dicks Sporting and Plus500

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Can any of the company-specific risk be diversified away by investing in both Dicks Sporting and Plus500 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 Dicks Sporting and Plus500 into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dicks Sporting Goods and Plus500, you can compare the effects of market volatilities on Dicks Sporting and Plus500 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 Dicks Sporting with a short position of Plus500. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dicks Sporting and Plus500.

Diversification Opportunities for Dicks Sporting and Plus500

0.75
  Correlation Coefficient

Poor diversification

The 3 months correlation between Dicks and Plus500 is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Dicks Sporting Goods and Plus500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Plus500 and Dicks Sporting 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 Dicks Sporting Goods are associated (or correlated) with Plus500. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Plus500 has no effect on the direction of Dicks Sporting i.e., Dicks Sporting and Plus500 go up and down completely randomly.

Pair Corralation between Dicks Sporting and Plus500

Considering the 90-day investment horizon Dicks Sporting Goods is expected to generate 1.26 times more return on investment than Plus500. However, Dicks Sporting is 1.26 times more volatile than Plus500. It trades about 0.07 of its potential returns per unit of risk. Plus500 is currently generating about 0.03 per unit of risk. If you would invest  4,911  in Dicks Sporting Goods on May 20, 2022 and sell it today you would earn a total of  6,315  from holding Dicks Sporting Goods or generate 128.59% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy99.8%
ValuesDaily Returns

Dicks Sporting Goods  vs.  Plus500

 Performance (%) 
       Timeline  
Dicks Sporting Goods 
Dicks Performance
15 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Dicks Sporting Goods are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain forward-looking signals, Dicks Sporting reported solid returns over the last few months and may actually be approaching a breakup point.

Dicks Price Channel

Plus500 
Plus500 Performance
9 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Plus500 are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal basic indicators, Plus500 may actually be approaching a critical reversion point that can send shares even higher in September 2022.

Plus500 Price Channel

Dicks Sporting and Plus500 Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Dicks Sporting and Plus500

The main advantage of trading using opposite Dicks Sporting and Plus500 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dicks Sporting position performs unexpectedly, Plus500 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 Plus500 will offset losses from the drop in Plus500's long position.
The idea behind Dicks Sporting Goods and Plus500 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 ETF Directory module to find actively traded Exchange Traded Funds (ETF) from around the world.

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