Correlation Between Monotaro and ThredUp

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

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

Diversification Opportunities for Monotaro and ThredUp

0.45

Correlation Coefficient

Monotaro  ThredUp

Very weak diversification

The 3 months correlation between Monotaro and ThredUp is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Monotaro Co and ThredUp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ThredUp and Monotaro 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 Monotaro Co are associated (or correlated) with ThredUp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ThredUp has no effect on the direction of Monotaro i.e., Monotaro and ThredUp go up and down completely randomly.

Pair Corralation between Monotaro and ThredUp

Assuming the 90 days horizon Monotaro is expected to generate 5.8 times less return on investment than ThredUp. But when comparing it to its historical volatility, Monotaro Co is 3.24 times less risky than ThredUp. It trades about 0.09 of its potential returns per unit of risk. ThredUp is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  86.00  in ThredUp on September 3, 2024 and sell it today you would earn a total of  87.00  from holding ThredUp or generate 101.16% return on investment over 90 days.

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

Monotaro Co  vs.  ThredUp

Monotaro

Risk-Adjusted Performance

6 of 100

Modest

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

ThredUp

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ThredUp are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, ThredUp reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Monotaro and ThredUp

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

The idea behind Monotaro Co and ThredUp 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.