Correlation Between Thor Industries and Tapestry

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

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

Diversification Opportunities for Thor Industries and Tapestry

-0.58

Correlation Coefficient

Thor Industries  Tapestry

Excellent diversification

The 3 months correlation between Thor and Tapestry is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Thor Industries and Tapestry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tapestry and Thor Industries 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 Thor Industries are associated (or correlated) with Tapestry. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tapestry has no effect on the direction of Thor Industries i.e., Thor Industries and Tapestry go up and down completely randomly.

Pair Corralation between Thor Industries and Tapestry

Considering the 90-day investment horizon Thor Industries is expected to generate 1.73 times less return on investment than Tapestry. In addition to that, Thor Industries is 1.22 times more volatile than Tapestry. It trades about 0.21 of its total potential returns per unit of risk. Tapestry is currently generating about 0.44 per unit of volatility. If you would invest  6,528  in Tapestry on October 25, 2024 and sell it today you would earn a total of  845.00  from holding Tapestry or generate 12.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Thor Industries  vs.  Tapestry

Thor Industries

Risk-Adjusted Performance

0 of 100

Very Weak

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

Tapestry

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Tapestry are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile basic indicators, Tapestry reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Thor Industries and Tapestry

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

The idea behind Thor Industries and Tapestry 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.