Correlation Between Solo Brands and Wearable Devices
Can any of the company-specific risk be diversified away by investing in both Solo Brands and Wearable Devices 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 Solo Brands and Wearable Devices into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Solo Brands and Wearable Devices, you can compare the effects of market volatilities on Solo Brands and Wearable Devices 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 Solo Brands with a short position of Wearable Devices. Check out your portfolio center. Please also check ongoing floating volatility patterns of Solo Brands and Wearable Devices.
Diversification Opportunities for Solo Brands and Wearable Devices
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Solo and Wearable is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Solo Brands and Wearable Devices in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wearable Devices and Solo Brands 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 Solo Brands are associated (or correlated) with Wearable Devices. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wearable Devices has no effect on the direction of Solo Brands i.e., Solo Brands and Wearable Devices go up and down completely randomly.
Pair Corralation between Solo Brands and Wearable Devices
Considering the 90-day investment horizon Solo Brands is expected to under-perform the Wearable Devices. But the stock apears to be less risky and, when comparing its historical volatility, Solo Brands is 2.61 times less risky than Wearable Devices. The stock trades about -0.03 of its potential returns per unit of risk. The Wearable Devices is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 1,138 in Wearable Devices on November 19, 2024 and sell it today you would lose (1,039) from holding Wearable Devices or give up 91.33% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Solo Brands vs. Wearable Devices
Performance |
| Timeline |
| Solo Brands |
| Wearable Devices |
Solo Brands and Wearable Devices Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Solo Brands and Wearable Devices
The main advantage of trading using opposite Solo Brands and Wearable Devices positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Solo Brands position performs unexpectedly, Wearable Devices 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 Wearable Devices will offset losses from the drop in Wearable Devices' long position.| Solo Brands vs. Qurate Retail Series | Solo Brands vs. Hour Loop | Solo Brands vs. 1StdibsCom | Solo Brands vs. Baozun Inc |
| Wearable Devices vs. Koss Corporation | Wearable Devices vs. Wearable Devices | Wearable Devices vs. Sonos Inc | Wearable Devices vs. LG Display Co |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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