Correlation Between Five Below and Build A

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

By analyzing existing cross correlation between Five Below and Build A Bear Workshop, you can compare the effects of market volatilities on Five Below and Build A 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 Five Below with a short position of Build A. Check out your portfolio center. Please also check ongoing floating volatility patterns of Five Below and Build A.

Diversification Opportunities for Five Below and Build A

-0.38

Correlation Coefficient

Five Below  Build A

Very good diversification

The 3 months correlation between Five and Build is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Five Below 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 and Five Below 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 Five Below are associated (or correlated) with Build A. 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 has no effect on the direction of Five Below i.e., Five Below and Build A go up and down completely randomly.

Pair Corralation between Five Below and Build A

Given the investment horizon of 90 days Five Below is expected to under-perform the Build A. But the stock apears to be less risky and, when comparing its historical volatility, Five Below is 1.11 times less risky than Build A. The stock trades about -0.27 of its potential returns per unit of risk. The Build A Bear Workshop is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  2,422  in Build A Bear Workshop on March 11, 2024 and sell it today you would earn a total of  195.00  from holding Build A Bear Workshop or generate 8.05% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

Five Below  vs.  Build A Bear Workshop

Five Below

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Five Below 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 basic indicators remain rather sound which may send shares a bit higher in July 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Build A Bear

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Build A Bear Workshop are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain fundamental drivers, Build A may actually be approaching a critical reversion point that can send shares even higher in July 2024.

Pair Trading with Five Below and Build A

The main advantage of trading using opposite Five Below and Build A positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Five Below position performs unexpectedly, Build A 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 will offset losses from the drop in Build A's long position.

The idea behind Five Below 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.

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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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.