Correlation Between Etsy and Arko Corp
Can any of the company-specific risk be diversified away by investing in both Etsy and Arko Corp 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 Etsy and Arko Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Etsy Inc and Arko Corp, you can compare the effects of market volatilities on Etsy and Arko Corp 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 Etsy with a short position of Arko Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Etsy and Arko Corp.
Diversification Opportunities for Etsy and Arko Corp
Very good diversification
The 3 months correlation between Etsy and Arko is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Etsy Inc and Arko Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arko Corp and Etsy 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 Etsy Inc are associated (or correlated) with Arko Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arko Corp has no effect on the direction of Etsy i.e., Etsy and Arko Corp go up and down completely randomly.
Pair Corralation between Etsy and Arko Corp
Given the investment horizon of 90 days Etsy Inc is expected to generate 0.5 times more return on investment than Arko Corp. However, Etsy Inc is 1.98 times less risky than Arko Corp. It trades about 0.15 of its potential returns per unit of risk. Arko Corp is currently generating about -0.13 per unit of risk. If you would invest 5,144 in Etsy Inc on September 1, 2024 and sell it today you would earn a total of 342.00 from holding Etsy Inc or generate 6.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 66.67% |
| Values | Daily Returns |
Etsy Inc vs. Arko Corp
Performance |
| Timeline |
| Etsy Inc |
| Arko Corp |
Etsy and Arko Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Etsy and Arko Corp
The main advantage of trading using opposite Etsy and Arko Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Etsy position performs unexpectedly, Arko Corp 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 Arko Corp will offset losses from the drop in Arko Corp's long position.The idea behind Etsy Inc and Arko Corp 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.| Arko Corp vs. Arko Corp | Arko Corp vs. Advantage Solutions | Arko Corp vs. CannBioRx Life Sciences | Arko Corp vs. GCM Grosvenor |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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