Correlation Between Franchise and Tandy Leather
Can any of the company-specific risk be diversified away by investing in both Franchise and Tandy Leather 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 Franchise and Tandy Leather into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Franchise Group and Tandy Leather Factory, you can compare the effects of market volatilities on Franchise and Tandy Leather 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 Franchise with a short position of Tandy Leather. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franchise and Tandy Leather.
Diversification Opportunities for Franchise and Tandy Leather
-0.04 | Correlation Coefficient |
Good diversification
The 3 months correlation between Franchise and Tandy is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Franchise Group and Tandy Leather Factory in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tandy Leather Factory and Franchise 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 Franchise Group are associated (or correlated) with Tandy Leather. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tandy Leather Factory has no effect on the direction of Franchise i.e., Franchise and Tandy Leather go up and down completely randomly.
Pair Corralation between Franchise and Tandy Leather
Considering the 90-day investment horizon Franchise Group is expected to generate 0.26 times more return on investment than Tandy Leather. However, Franchise Group is 3.81 times less risky than Tandy Leather. It trades about 0.11 of its potential returns per unit of risk. Tandy Leather Factory is currently generating about 0.0 per unit of risk. If you would invest 2,917 in Franchise Group on August 31, 2024 and sell it today you would earn a total of 53.00 from holding Franchise Group or generate 1.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 8.58% |
| Values | Daily Returns |
Franchise Group vs. Tandy Leather Factory
Performance |
| Timeline |
| Franchise Group |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Tandy Leather Factory |
Franchise and Tandy Leather Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franchise and Tandy Leather
The main advantage of trading using opposite Franchise and Tandy Leather positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franchise position performs unexpectedly, Tandy Leather 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 Tandy Leather will offset losses from the drop in Tandy Leather's long position.| Franchise vs. Mega Uranium | Franchise vs. Laramide Resources | Franchise vs. NXG NextGen Infrastructure | Franchise vs. Pinetree Capital |
| Tandy Leather vs. Green River Gold | Tandy Leather vs. Dixons Carphone plc | Tandy Leather vs. Ceconomy AG ADR | Tandy Leather vs. Winmark |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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