Correlation Between Etsy and Oriental Culture

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

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

Diversification Opportunities for Etsy and Oriental Culture

0.15

Correlation Coefficient

Etsy  Oriental Culture

Average diversification

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

Pair Corralation between Etsy and Oriental Culture

Given the investment horizon of 90 days Etsy Inc is expected to under-perform the Oriental Culture. But the stock apears to be less risky and, when comparing its historical volatility, Etsy Inc is 2.44 times less risky than Oriental Culture. The stock trades about -0.05 of its potential returns per unit of risk. The Oriental Culture Holding is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  285.00  in Oriental Culture Holding on October 9, 2024 and sell it today you would lose (152.00) from holding Oriental Culture Holding or give up 53.33% of portfolio value over 90 days.

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

Etsy Inc  vs.  Oriental Culture Holding

Etsy Inc

Risk-Adjusted Performance

6 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Etsy Inc are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, Etsy showed solid returns over the last few months and may actually be approaching a breakup point.

Oriental Culture Holding

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Oriental Culture Holding are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak fundamental indicators, Oriental Culture reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Etsy and Oriental Culture

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

The idea behind Etsy Inc and Oriental Culture Holding 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.