Correlation Between Chewy and JJill
Can any of the company-specific risk be diversified away by investing in both Chewy and JJill 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 Chewy and JJill into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Chewy Inc and JJill Inc, you can compare the effects of market volatilities on Chewy and JJill 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 Chewy with a short position of JJill. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chewy and JJill.
Diversification Opportunities for Chewy and JJill
Poor diversification
The 3 months correlation between Chewy and JJill is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Chewy Inc and JJill Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JJill Inc and Chewy 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 Chewy Inc are associated (or correlated) with JJill. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JJill Inc has no effect on the direction of Chewy i.e., Chewy and JJill go up and down completely randomly.
Pair Corralation between Chewy and JJill
Given the investment horizon of 90 days Chewy Inc is expected to under-perform the JJill. In addition to that, Chewy is 1.03 times more volatile than JJill Inc. It trades about -0.11 of its total potential returns per unit of risk. JJill Inc is currently generating about 0.13 per unit of volatility. If you would invest 2,594 in JJill Inc on September 12, 2024 and sell it today you would earn a total of 172.00 from holding JJill Inc or generate 6.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Chewy Inc vs. JJill Inc
Performance |
| Timeline |
| Chewy Inc |
| JJill Inc |
Chewy and JJill Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chewy and JJill
The main advantage of trading using opposite Chewy and JJill positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chewy position performs unexpectedly, JJill 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 JJill will offset losses from the drop in JJill's long position.The idea behind Chewy Inc and JJill Inc 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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