Correlation Between Ross Stores and Etsy

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

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

Diversification Opportunities for Ross Stores and Etsy

0.81

Correlation Coefficient

Ross Stores  Etsy

Very poor diversification

The 3 months correlation between Ross and Etsy is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Ross Stores and Etsy Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Etsy Inc and Ross Stores 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 Ross Stores are associated (or correlated) with Etsy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Etsy Inc has no effect on the direction of Ross Stores i.e., Ross Stores and Etsy go up and down completely randomly.

Pair Corralation between Ross Stores and Etsy

Given the investment horizon of 90 days Ross Stores is expected to under-perform the Etsy. But the stock apears to be less risky and, when comparing its historical volatility, Ross Stores is 1.89 times less risky than Etsy. The stock trades about -0.2 of its potential returns per unit of risk. The Etsy Inc is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  5,271  in Etsy Inc on December 27, 2024 and sell it today you would lose (489.00) from holding Etsy Inc or give up 9.28% of portfolio value over 90 days.

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

Ross Stores  vs.  Etsy Inc

Ross Stores

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ross Stores has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Etsy Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Etsy Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Ross Stores and Etsy

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

The idea behind Ross Stores and Etsy Inc 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.