Correlation Between ASOS Plc and ThredUp
Can any of the company-specific risk be diversified away by investing in both ASOS Plc and ThredUp 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 ASOS Plc and ThredUp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ASOS plc PK and ThredUp, you can compare the effects of market volatilities on ASOS Plc and ThredUp 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 ASOS Plc with a short position of ThredUp. Check out your portfolio center. Please also check ongoing floating volatility patterns of ASOS Plc and ThredUp.
Diversification Opportunities for ASOS Plc and ThredUp
Very good diversification
The 3 months correlation between ASOS and ThredUp is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding ASOS plc PK and ThredUp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ThredUp and ASOS Plc 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 ASOS plc PK are associated (or correlated) with ThredUp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ThredUp has no effect on the direction of ASOS Plc i.e., ASOS Plc and ThredUp go up and down completely randomly.
Pair Corralation between ASOS Plc and ThredUp
Assuming the 90 days horizon ASOS Plc is expected to generate 45.8 times less return on investment than ThredUp. But when comparing it to its historical volatility, ASOS plc PK is 4.12 times less risky than ThredUp. It trades about 0.03 of its potential returns per unit of risk. ThredUp is currently generating about 0.36 of returns per unit of risk over similar time horizon. If you would invest 62.00 in ThredUp on September 1, 2024 and sell it today you would earn a total of 90.00 from holding ThredUp or generate 145.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
ASOS plc PK vs. ThredUp
Performance |
| Timeline |
| ASOS plc PK |
| ThredUp |
ASOS Plc and ThredUp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ASOS Plc and ThredUp
The main advantage of trading using opposite ASOS Plc and ThredUp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ASOS Plc position performs unexpectedly, ThredUp 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 ThredUp will offset losses from the drop in ThredUp's long position.The idea behind ASOS plc PK and ThredUp 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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