Correlation Between Gap and Stitch Fix
Can any of the company-specific risk be diversified away by investing in both Gap and Stitch Fix 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 Gap and Stitch Fix into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Gap Inc and Stitch Fix, you can compare the effects of market volatilities on Gap and Stitch Fix 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 Gap with a short position of Stitch Fix. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gap and Stitch Fix.
Diversification Opportunities for Gap and Stitch Fix
0.31 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Gap and Stitch is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Gap Inc and Stitch Fix in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stitch Fix and Gap 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 Gap Inc are associated (or correlated) with Stitch Fix. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stitch Fix has no effect on the direction of Gap i.e., Gap and Stitch Fix go up and down completely randomly.
Pair Corralation between Gap and Stitch Fix
Considering the 90-day investment horizon Gap Inc is expected to generate 0.68 times more return on investment than Stitch Fix. However, Gap Inc is 1.47 times less risky than Stitch Fix. It trades about 0.09 of its potential returns per unit of risk. Stitch Fix is currently generating about 0.02 per unit of risk. If you would invest 958.00 in Gap Inc on August 24, 2024 and sell it today you would earn a total of 1,370 from holding Gap Inc or generate 143.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 85.3% |
| Values | Daily Returns |
Gap Inc vs. Stitch Fix
Performance |
| Timeline |
| Gap Inc |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Stitch Fix |
Gap and Stitch Fix Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gap and Stitch Fix
The main advantage of trading using opposite Gap and Stitch Fix positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gap position performs unexpectedly, Stitch Fix 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 Stitch Fix will offset losses from the drop in Stitch Fix's long position.The idea behind Gap Inc and Stitch Fix 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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