Correlation Between Basic Materials and Etsy
Can any of the company-specific risk be diversified away by investing in both Basic Materials and Etsy 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 Basic Materials and Etsy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Basic Materials and Etsy Inc, you can compare the effects of market volatilities on Basic Materials and Etsy 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 Basic Materials with a short position of Etsy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Basic Materials and Etsy.
Diversification Opportunities for Basic Materials and Etsy
-0.31 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Basic and Etsy is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Basic Materials and Etsy Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Etsy Inc and Basic Materials 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 Basic Materials are associated (or correlated) with Etsy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Etsy Inc has no effect on the direction of Basic Materials i.e., Basic Materials and Etsy go up and down completely randomly.
Pair Corralation between Basic Materials and Etsy
Assuming the 90 days trading horizon Basic Materials is expected to generate 25.33 times less return on investment than Etsy. But when comparing it to its historical volatility, Basic Materials is 2.38 times less risky than Etsy. It trades about 0.02 of its potential returns per unit of risk. Etsy Inc is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 1,844 in Etsy Inc on August 30, 2024 and sell it today you would earn a total of 172.00 from holding Etsy Inc or generate 9.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Basic Materials vs. Etsy Inc
Performance |
| Timeline |
Basic Materials and Etsy Volatility Contrast
Predicted Return Density |
| Returns |
Basic Materials
Pair trading matchups for Basic Materials
Etsy Inc
Pair trading matchups for Etsy
Pair Trading with Basic Materials and Etsy
The main advantage of trading using opposite Basic Materials and Etsy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Basic Materials position performs unexpectedly, Etsy 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 Etsy will offset losses from the drop in Etsy's long position.| Basic Materials vs. United Rentals | Basic Materials vs. Livetech da Bahia | Basic Materials vs. Telecomunicaes Brasileiras SA | Basic Materials vs. Charter Communications |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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