Correlation Between Tandy Leather and US Dollar

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

Diversification Opportunities for Tandy Leather and US Dollar

0.3

Correlation Coefficient

Tandy Leather  US Dollar

Weak diversification

The 3 months correlation between Tandy and DXY is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Tandy Leather Factory and US Dollar Currency in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Dollar Currency 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 US Dollar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US Dollar Currency has no effect on the direction of Tandy Leather i.e., Tandy Leather and US Dollar go up and down completely randomly.

Pair Corralation between Tandy Leather and US Dollar

Considering the 90-day investment horizon Tandy Leather Factory is expected to generate 7.36 times more return on investment than US Dollar. However, Tandy Leather is 7.36 times more volatile than US Dollar Currency. It trades about 0.05 of its potential returns per unit of risk. US Dollar Currency is currently generating about 0.2 per unit of risk. If you would invest  435.00  in Tandy Leather Factory on October 10, 2024 and sell it today you would earn a total of  30.00  from holding Tandy Leather Factory or generate 6.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.39%
Values	Daily Returns

Tandy Leather Factory  vs.  US Dollar Currency

Pair Trading with Tandy Leather and US Dollar

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

The idea behind Tandy Leather Factory and US Dollar Currency 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.