Correlation Between Old Republic and Tandy Leather

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

By analyzing existing cross correlation between Old Republic International and Tandy Leather Factory, you can compare the effects of market volatilities on Old Republic and Tandy Leather 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 Old Republic with a short position of Tandy Leather. Check out your portfolio center. Please also check ongoing floating volatility patterns of Old Republic and Tandy Leather.

Diversification Opportunities for Old Republic and Tandy Leather

-0.21

Correlation Coefficient

Old Republic  Tandy Leather

Very good diversification

The 3 months correlation between Old and Tandy is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Old Republic International and Tandy Leather Factory in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tandy Leather Factory and Old Republic 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 Old Republic International are associated (or correlated) with Tandy Leather. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tandy Leather Factory has no effect on the direction of Old Republic i.e., Old Republic and Tandy Leather go up and down completely randomly.

Pair Corralation between Old Republic and Tandy Leather

Considering the 90-day investment horizon Old Republic International is expected to generate 0.43 times more return on investment than Tandy Leather. However, Old Republic International is 2.32 times less risky than Tandy Leather. It trades about 0.15 of its potential returns per unit of risk. Tandy Leather Factory is currently generating about -0.07 per unit of risk. If you would invest  3,384  in Old Republic International on December 23, 2024 and sell it today you would earn a total of  380.00  from holding Old Republic International or generate 11.23% return on investment over 90 days.

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

Old Republic International  vs.  Tandy Leather Factory

Old Republic Interna

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Old Republic International are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent basic indicators, Old Republic may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Tandy Leather Factory

Risk-Adjusted Performance

Very Weak

Over the last 90 days Tandy Leather Factory has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's essential indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Old Republic and Tandy Leather

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

The idea behind Old Republic International and Tandy Leather Factory 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 Global Correlations module to find global opportunities by holding instruments from different markets.