Correlation Between Tandy Leather and Codexis

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

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

Diversification Opportunities for Tandy Leather and Codexis

0.5

Correlation Coefficient

Tandy Leather  Codexis

Very weak diversification

The 3 months correlation between Tandy and Codexis is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Tandy Leather Factory and Codexis in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Codexis and Tandy Leather 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 Tandy Leather Factory are associated (or correlated) with Codexis. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Codexis has no effect on the direction of Tandy Leather i.e., Tandy Leather and Codexis go up and down completely randomly.

Pair Corralation between Tandy Leather and Codexis

Considering the 90-day investment horizon Tandy Leather is expected to generate 3.94 times less return on investment than Codexis. But when comparing it to its historical volatility, Tandy Leather Factory is 2.58 times less risky than Codexis. It trades about 0.01 of its potential returns per unit of risk. Codexis is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  651.00  in Codexis on October 11, 2024 and sell it today you would lose (175.00) from holding Codexis or give up 26.88% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.6%
Values	Daily Returns

Tandy Leather Factory  vs.  Codexis

Tandy Leather Factory

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Tandy Leather Factory are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile essential indicators, Tandy Leather may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Codexis

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Codexis are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Codexis unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tandy Leather and Codexis

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

The idea behind Tandy Leather Factory and Codexis 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.

Check out your portfolio center.

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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.