Correlation Between Etsy and ASOS Plc

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

By analyzing existing cross correlation between Etsy Inc and ASOS plc PK, you can compare the effects of market volatilities on Etsy and ASOS Plc 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 ASOS Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Etsy and ASOS Plc.

Diversification Opportunities for Etsy and ASOS Plc

0.15

Correlation Coefficient

Etsy  ASOS Plc

Average diversification

The 3 months correlation between Etsy and ASOS is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Etsy Inc and ASOS plc PK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ASOS plc PK 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 ASOS Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ASOS plc PK has no effect on the direction of Etsy i.e., Etsy and ASOS Plc go up and down completely randomly.

Pair Corralation between Etsy and ASOS Plc

Given the investment horizon of 90 days Etsy is expected to generate 1.81 times less return on investment than ASOS Plc. But when comparing it to its historical volatility, Etsy Inc is 1.34 times less risky than ASOS Plc. It trades about 0.01 of its potential returns per unit of risk. ASOS plc PK is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  473.00  in ASOS plc PK on September 3, 2024 and sell it today you would earn a total of  2.00  from holding ASOS plc PK or generate 0.42% return on investment over 90 days.

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

Etsy Inc  vs.  ASOS plc PK

Etsy Inc

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Etsy Inc are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Etsy is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

ASOS plc PK

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ASOS plc PK are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong primary indicators, ASOS Plc is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Etsy and ASOS Plc

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

The idea behind Etsy Inc and ASOS plc PK 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.