Correlation Between Etsy and Teladoc

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

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

Diversification Opportunities for Etsy and Teladoc

0.64

Correlation Coefficient

Etsy  Teladoc

Poor diversification

The 3 months correlation between Etsy and Teladoc is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Etsy Inc and Teladoc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Teladoc and Etsy 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 Etsy Inc are associated (or correlated) with Teladoc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Teladoc has no effect on the direction of Etsy i.e., Etsy and Teladoc go up and down completely randomly.

Pair Corralation between Etsy and Teladoc

Assuming the 90 days horizon Etsy Inc is expected to under-perform the Teladoc. But the stock apears to be less risky and, when comparing its historical volatility, Etsy Inc is 1.5 times less risky than Teladoc. The stock trades about -0.01 of its potential returns per unit of risk. The Teladoc is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  862.00  in Teladoc on September 30, 2024 and sell it today you would earn a total of  41.00  from holding Teladoc or generate 4.76% return on investment over 90 days.

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

Etsy Inc  vs.  Teladoc

Etsy Inc

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Etsy Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Etsy is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Teladoc

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Teladoc are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Teladoc reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Etsy and Teladoc

The main advantage of trading using opposite Etsy and Teladoc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Etsy position performs unexpectedly, Teladoc 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 Teladoc will offset losses from the drop in Teladoc's long position.

The idea behind Etsy Inc and Teladoc 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.