Correlation Between Chewy and Tapestry
Can any of the company-specific risk be diversified away by investing in both Chewy and Tapestry 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 Tapestry into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Chewy Inc and Tapestry, you can compare the effects of market volatilities on Chewy and Tapestry 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 Tapestry. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chewy and Tapestry.
Diversification Opportunities for Chewy and Tapestry
Poor diversification
The 3 months correlation between Chewy and Tapestry is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Chewy Inc and Tapestry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tapestry 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 Tapestry. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tapestry has no effect on the direction of Chewy i.e., Chewy and Tapestry go up and down completely randomly.
Pair Corralation between Chewy and Tapestry
Given the investment horizon of 90 days Chewy Inc is expected to generate 0.89 times more return on investment than Tapestry. However, Chewy Inc is 1.13 times less risky than Tapestry. It trades about 0.42 of its potential returns per unit of risk. Tapestry is currently generating about 0.28 per unit of risk. If you would invest 2,680 in Chewy Inc on August 27, 2024 and sell it today you would earn a total of 782.00 from holding Chewy Inc or generate 29.18% 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. Tapestry
Performance |
| Timeline |
| Chewy Inc |
| Tapestry |
Chewy and Tapestry Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chewy and Tapestry
The main advantage of trading using opposite Chewy and Tapestry positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chewy position performs unexpectedly, Tapestry 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 Tapestry will offset losses from the drop in Tapestry's long position.The idea behind Chewy Inc and Tapestry 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.| Tapestry vs. Signet Jewelers | Tapestry vs. Movado Group | Tapestry vs. Lanvin Group Holdings | Tapestry vs. TheRealReal |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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