Correlation Between Shopify and Etsy

Can any of the company-specific risk be diversified away by investing in both Shopify 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 Shopify and Etsy into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Shopify and Etsy Inc, you can compare the effects of market volatilities on Shopify 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 Shopify with a short position of Etsy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shopify and Etsy.

Diversification Opportunities for Shopify and Etsy

0.75

Correlation Coefficient

Shopify  Etsy

Poor diversification

The 3 months correlation between Shopify and Etsy is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Shopify and Etsy Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Etsy Inc and Shopify 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 Shopify 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 Shopify i.e., Shopify and Etsy go up and down completely randomly.

Pair Corralation between Shopify and Etsy

Assuming the 90 days horizon Shopify is expected to generate 1.29 times more return on investment than Etsy. However, Shopify is 1.29 times more volatile than Etsy Inc. It trades about -0.08 of its potential returns per unit of risk. Etsy Inc is currently generating about -0.15 per unit of risk. If you would invest  10,542  in Shopify on December 21, 2024 and sell it today you would lose (1,838) from holding Shopify or give up 17.44% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Shopify  vs.  Etsy Inc

Shopify

Risk-Adjusted Performance

Very Weak

Over the last 90 days Shopify has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Etsy Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Etsy Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Shopify and Etsy

The main advantage of trading using opposite Shopify and Etsy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shopify 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.

The idea behind Shopify and Etsy Inc 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.