Correlation Between Overstockcom and BoohooCom PLC

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

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

Diversification Opportunities for Overstockcom and BoohooCom PLC

0.92

Correlation Coefficient

Overstockcom  BoohooCom PLC

Almost no diversification

The 3 months correlation between Overstockcom and BoohooCom is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Overstockcom and BoohooCom PLC ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BoohooCom PLC ADR and Overstockcom 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 Overstockcom are associated (or correlated) with BoohooCom PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BoohooCom PLC ADR has no effect on the direction of Overstockcom i.e., Overstockcom and BoohooCom PLC go up and down completely randomly.

Pair Corralation between Overstockcom and BoohooCom PLC

If you would invest  903.00  in BoohooCom PLC ADR on October 7, 2024 and sell it today you would earn a total of  30.00  from holding BoohooCom PLC ADR or generate 3.32% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	0.4%
Values	Daily Returns

Overstockcom  vs.  BoohooCom PLC ADR

Overstockcom

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Overstockcom has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Overstockcom is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

BoohooCom PLC ADR

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in BoohooCom PLC ADR are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, BoohooCom PLC showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Overstockcom and BoohooCom PLC

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

The idea behind Overstockcom and BoohooCom PLC ADR 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.