Correlation Between Tandy Leather and Card Factory

Can any of the company-specific risk be diversified away by investing in both Tandy Leather and Card Factory 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 Card Factory 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 Card Factory plc, you can compare the effects of market volatilities on Tandy Leather and Card Factory 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 Card Factory. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tandy Leather and Card Factory.

Diversification Opportunities for Tandy Leather and Card Factory

0.64

Correlation Coefficient

Tandy Leather  Card Factory

Poor diversification

The 3 months correlation between Tandy and Card is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Tandy Leather Factory and Card Factory plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Card Factory plc 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 Card Factory. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Card Factory plc has no effect on the direction of Tandy Leather i.e., Tandy Leather and Card Factory go up and down completely randomly.

Pair Corralation between Tandy Leather and Card Factory

Considering the 90-day investment horizon Tandy Leather Factory is expected to generate 0.29 times more return on investment than Card Factory. However, Tandy Leather Factory is 3.45 times less risky than Card Factory. It trades about -0.17 of its potential returns per unit of risk. Card Factory plc is currently generating about -0.25 per unit of risk. If you would invest  465.00  in Tandy Leather Factory on October 20, 2024 and sell it today you would lose (22.00) from holding Tandy Leather Factory or give up 4.73% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	90.91%
Values	Daily Returns

Tandy Leather Factory  vs.  Card Factory plc

Tandy Leather Factory

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Tandy Leather Factory are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable essential indicators, Tandy Leather is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Card Factory plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Card Factory plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's fundamental indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Tandy Leather and Card Factory

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

The idea behind Tandy Leather Factory and Card Factory plc 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.