Correlation Between ThredUp and Electrameccanica

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

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

Diversification Opportunities for ThredUp and Electrameccanica

0.77

Correlation Coefficient

ThredUp  Electrameccanica

Poor diversification

The 3 months correlation between ThredUp and Electrameccanica is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding ThredUp and Electrameccanica Vehicles Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Electrameccanica Veh and ThredUp 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 ThredUp are associated (or correlated) with Electrameccanica. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Electrameccanica Veh has no effect on the direction of ThredUp i.e., ThredUp and Electrameccanica go up and down completely randomly.

Pair Corralation between ThredUp and Electrameccanica

Given the investment horizon of 90 days ThredUp is expected to generate 1.13 times more return on investment than Electrameccanica. However, ThredUp is 1.13 times more volatile than Electrameccanica Vehicles Corp. It trades about 0.03 of its potential returns per unit of risk. Electrameccanica Vehicles Corp is currently generating about 0.0 per unit of risk. If you would invest  172.00  in ThredUp on October 9, 2024 and sell it today you would lose (24.00) from holding ThredUp or give up 13.95% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	26.21%
Values	Daily Returns

ThredUp  vs.  Electrameccanica Vehicles Corp

ThredUp

Risk-Adjusted Performance

12 of 100

Good

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

Electrameccanica Veh

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with ThredUp and Electrameccanica

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

The idea behind ThredUp and Electrameccanica Vehicles Corp 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.