Correlation Between Movado and Tapestry
Can any of the company-specific risk be diversified away by investing in both Movado and Tapestry 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 Movado and Tapestry into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Movado Group and Tapestry, you can compare the effects of market volatilities on Movado and Tapestry 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 Movado with a short position of Tapestry. Check out your portfolio center. Please also check ongoing floating volatility patterns of Movado and Tapestry.
Diversification Opportunities for Movado and Tapestry
Very good diversification
The 3 months correlation between Movado and Tapestry is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Movado Group and Tapestry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tapestry and Movado 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 Movado Group are associated (or correlated) with Tapestry. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tapestry has no effect on the direction of Movado i.e., Movado and Tapestry go up and down completely randomly.
Pair Corralation between Movado and Tapestry
Considering the 90-day investment horizon Movado Group is expected to under-perform the Tapestry. But the stock apears to be less risky and, when comparing its historical volatility, Movado Group is 1.08 times less risky than Tapestry. The stock trades about -0.08 of its potential returns per unit of risk. The Tapestry is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 4,640 in Tapestry on August 27, 2024 and sell it today you would earn a total of 1,252 from holding Tapestry or generate 26.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Movado Group vs. Tapestry
Performance |
| Timeline |
| Movado Group |
| Tapestry |
Movado and Tapestry Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Movado and Tapestry
The main advantage of trading using opposite Movado and Tapestry positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Movado position performs unexpectedly, Tapestry 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 Tapestry will offset losses from the drop in Tapestry's long position.The idea behind Movado Group and Tapestry 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.| Tapestry vs. Signet Jewelers | Tapestry vs. Movado Group | Tapestry vs. Lanvin Group Holdings | Tapestry vs. TheRealReal |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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