Correlation Between Aarons and Best Buy

Can any of the company-specific risk be diversified away by investing in both Aarons 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 Aarons and Best Buy into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between The Aarons and Best Buy Co, you can compare the effects of market volatilities on Aarons 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 Aarons with a short position of Best Buy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aarons and Best Buy.

Diversification Opportunities for Aarons and Best Buy

-0.46

Correlation Coefficient

Aarons  Best Buy

Very good diversification

The 3 months correlation between Aarons and Best is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding The Aarons and Best Buy Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Best Buy and Aarons 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 The Aarons 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 Aarons i.e., Aarons and Best Buy go up and down completely randomly.

Pair Corralation between Aarons and Best Buy

Considering the 90-day investment horizon The Aarons is expected to under-perform the Best Buy. In addition to that, Aarons is 1.81 times more volatile than Best Buy Co. It trades about -0.03 of its total potential returns per unit of risk. Best Buy Co is currently generating about 0.02 per unit of volatility. If you would invest  6,867  in Best Buy Co on February 7, 2024 and sell it today you would earn a total of  573.00  from holding Best Buy Co or generate 8.34% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

The Aarons  vs.  Best Buy Co

Aarons

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Aarons 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 basic indicators remain very healthy which may send shares a bit higher in June 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Best Buy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Best Buy Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong fundamental drivers, Best Buy is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Aarons and Best Buy

The main advantage of trading using opposite Aarons and Best Buy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aarons 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.

The idea behind The Aarons 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.

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 the Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.