Correlation Between Torrid Holdings and Zumiez

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

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

Diversification Opportunities for Torrid Holdings and Zumiez

-0.36

Correlation Coefficient

Torrid Holdings  Zumiez

Very good diversification

The 3 months correlation between Torrid and Zumiez is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Torrid Holdings and Zumiez Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zumiez Inc and Torrid Holdings 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 Torrid Holdings are associated (or correlated) with Zumiez. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zumiez Inc has no effect on the direction of Torrid Holdings i.e., Torrid Holdings and Zumiez go up and down completely randomly.

Pair Corralation between Torrid Holdings and Zumiez

Given the investment horizon of 90 days Torrid Holdings is expected to generate 1.82 times more return on investment than Zumiez. However, Torrid Holdings is 1.82 times more volatile than Zumiez Inc. It trades about 0.04 of its potential returns per unit of risk. Zumiez Inc is currently generating about 0.01 per unit of risk. If you would invest  425.00  in Torrid Holdings on September 28, 2024 and sell it today you would earn a total of  72.00  from holding Torrid Holdings or generate 16.94% return on investment over 90 days.

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

Torrid Holdings  vs.  Zumiez Inc

Torrid Holdings

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Torrid Holdings are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Torrid Holdings showed solid returns over the last few months and may actually be approaching a breakup point.

Zumiez Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zumiez Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong primary indicators, Zumiez is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Torrid Holdings and Zumiez

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

The idea behind Torrid Holdings and Zumiez 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.

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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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.