Correlation Between Overstockcom and Farfetch

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

By analyzing existing cross correlation between Overstockcom and Farfetch Ltd Class, you can compare the effects of market volatilities on Overstockcom and Farfetch 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 Farfetch. Check out your portfolio center. Please also check ongoing floating volatility patterns of Overstockcom and Farfetch.

Diversification Opportunities for Overstockcom and Farfetch

0.0

Correlation Coefficient

Overstockcom  Farfetch

Pay attention - limited upside

The 3 months correlation between Overstockcom and Farfetch is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Overstockcom and Farfetch Ltd Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Farfetch Class 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 Farfetch. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Farfetch Class has no effect on the direction of Overstockcom i.e., Overstockcom and Farfetch go up and down completely randomly.

Pair Corralation between Overstockcom and Farfetch

If you would invest (100.00) in Farfetch Ltd Class on November 28, 2024 and sell it today you would earn a total of  100.00  from holding Farfetch Ltd Class or generate -100.0% return on investment over 90 days.

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

Overstockcom  vs.  Farfetch Ltd Class

Overstockcom

Risk-Adjusted Performance

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.

Farfetch Class

Risk-Adjusted Performance

Very Weak

Over the last 90 days Farfetch Ltd Class has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong fundamental indicators, Farfetch is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Overstockcom and Farfetch

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

The idea behind Overstockcom and Farfetch Ltd Class 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.