Correlation Between Shopify and Joann

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

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

Diversification Opportunities for Shopify and Joann

0.0

Correlation Coefficient

Shopify  Joann

Pay attention - limited upside

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

Pair Corralation between Shopify and Joann

Given the investment horizon of 90 days Shopify is expected to generate 0.6 times more return on investment than Joann. However, Shopify is 1.67 times less risky than Joann. It trades about 0.08 of its potential returns per unit of risk. Joann Inc is currently generating about -0.12 per unit of risk. If you would invest  3,917  in Shopify on October 9, 2024 and sell it today you would earn a total of  7,507  from holding Shopify or generate 191.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	26.26%
Values	Daily Returns

Shopify  vs.  Joann Inc

Shopify

Risk-Adjusted Performance

12 of 100

Good

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

Joann Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Joann Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Joann is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Shopify and Joann

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

The idea behind Shopify and Joann 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.