Correlation Between Boot Barn and Tapestry

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

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

Diversification Opportunities for Boot Barn and Tapestry

-0.24

Correlation Coefficient

Boot Barn  Tapestry

Very good diversification

The 3 months correlation between Boot and Tapestry is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Boot Barn Holdings and Tapestry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tapestry and Boot Barn 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 Boot Barn Holdings 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 Boot Barn i.e., Boot Barn and Tapestry go up and down completely randomly.

Pair Corralation between Boot Barn and Tapestry

Given the investment horizon of 90 days Boot Barn is expected to generate 1.34 times less return on investment than Tapestry. But when comparing it to its historical volatility, Boot Barn Holdings is 1.02 times less risky than Tapestry. It trades about 0.23 of its potential returns per unit of risk. Tapestry is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest  4,949  in Tapestry on October 7, 2024 and sell it today you would earn a total of  1,728  from holding Tapestry or generate 34.92% return on investment over 90 days.

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

Boot Barn Holdings  vs.  Tapestry

Boot Barn Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Boot Barn Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Boot Barn is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Tapestry

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Tapestry are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile basic indicators, Tapestry reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Boot Barn and Tapestry

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

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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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.