Correlation Between Lands End and Best Buy

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

Diversification Opportunities for Lands End and Best Buy

0.35
  Correlation Coefficient

Weak diversification

The 3 months correlation between Lands and Best Buy is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Lands End and Best Buy Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Best Buy and Lands End 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 Lands End 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 Lands End i.e., Lands End and Best Buy go up and down completely randomly.

Pair Corralation between Lands End and Best Buy

Allowing for the 90-day total investment horizon Lands End is expected to under-perform the Best Buy. In addition to that, Lands End is 1.66 times more volatile than Best Buy Co. It trades about -0.06 of its total potential returns per unit of risk. Best Buy Co is currently generating about -0.01 per unit of volatility. If you would invest  10,273  in Best Buy Co on September 4, 2022 and sell it today you would lose (1,613)  from holding Best Buy Co or give up 15.7% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Lands End  vs.  Best Buy Co

 Performance (%) 
       Timeline  
Lands End 
Lands Performance
0 of 100
Over the last 90 days Lands End has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2023. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Lands Price Channel

Best Buy 
Best Buy Performance
9 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Best Buy Co are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting fundamental drivers, Best Buy showed solid returns over the last few months and may actually be approaching a breakup point.

Best Buy Price Channel

Lands End and Best Buy Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Lands End and Best Buy

The main advantage of trading using opposite Lands End and Best Buy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lands End 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.
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The idea behind Lands End and Best Buy Co 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.
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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 Price Transformation module to use Price Transformation models to analyze depth of different equity instruments across global markets.

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