Correlation Between Envela Corp and TheRealReal

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

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

Diversification Opportunities for Envela Corp and TheRealReal

0.9

Correlation Coefficient

Envela Corp  TheRealReal

Almost no diversification

The 3 months correlation between Envela and TheRealReal is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Envela Corp and TheRealReal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TheRealReal and Envela Corp 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 Envela Corp are associated (or correlated) with TheRealReal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TheRealReal has no effect on the direction of Envela Corp i.e., Envela Corp and TheRealReal go up and down completely randomly.

Pair Corralation between Envela Corp and TheRealReal

Considering the 90-day investment horizon Envela Corp is expected to generate 2.71 times less return on investment than TheRealReal. But when comparing it to its historical volatility, Envela Corp is 2.74 times less risky than TheRealReal. It trades about 0.28 of its potential returns per unit of risk. TheRealReal is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest  264.00  in TheRealReal on August 30, 2024 and sell it today you would earn a total of  312.00  from holding TheRealReal or generate 118.18% return on investment over 90 days.

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

Envela Corp  vs.  TheRealReal

Envela Corp

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Envela Corp are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite somewhat abnormal essential indicators, Envela Corp sustained solid returns over the last few months and may actually be approaching a breakup point.

TheRealReal

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in TheRealReal are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite quite inconsistent basic indicators, TheRealReal disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Envela Corp and TheRealReal

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

The idea behind Envela Corp and TheRealReal 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.