Correlation Between Aritzia and Shopify
Can any of the company-specific risk be diversified away by investing in both Aritzia and Shopify 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 Aritzia and Shopify into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aritzia and Shopify, you can compare the effects of market volatilities on Aritzia and Shopify 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 Aritzia with a short position of Shopify. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aritzia and Shopify.
Diversification Opportunities for Aritzia and Shopify
Very good diversification
The 3 months correlation between Aritzia and Shopify is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Aritzia and Shopify in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shopify and Aritzia 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 Aritzia are associated (or correlated) with Shopify. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shopify has no effect on the direction of Aritzia i.e., Aritzia and Shopify go up and down completely randomly.
Pair Corralation between Aritzia and Shopify
Assuming the 90 days trading horizon Aritzia is expected to generate 3.75 times less return on investment than Shopify. But when comparing it to its historical volatility, Aritzia is 2.44 times less risky than Shopify. It trades about 0.21 of its potential returns per unit of risk. Shopify is currently generating about 0.33 of returns per unit of risk over similar time horizon. If you would invest 11,205 in Shopify on August 30, 2024 and sell it today you would earn a total of 4,575 from holding Shopify or generate 40.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Aritzia vs. Shopify
Performance |
| Timeline |
| Aritzia |
| Shopify |
Aritzia and Shopify Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Aritzia and Shopify
The main advantage of trading using opposite Aritzia and Shopify positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aritzia position performs unexpectedly, Shopify 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 Shopify will offset losses from the drop in Shopify's long position.| Aritzia vs. Canada Goose Holdings | Aritzia vs. Restaurant Brands International | Aritzia vs. Lightspeed Commerce | Aritzia vs. goeasy |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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