Correlation Between Tapestry and Birks

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

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

Diversification Opportunities for Tapestry and Birks

-0.54

Correlation Coefficient

Tapestry  Birks

Excellent diversification

The 3 months correlation between Tapestry and Birks is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Tapestry and Birks Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Birks Group and Tapestry 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 Tapestry are associated (or correlated) with Birks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Birks Group has no effect on the direction of Tapestry i.e., Tapestry and Birks go up and down completely randomly.

Pair Corralation between Tapestry and Birks

Considering the 90-day investment horizon Tapestry is expected to generate 0.53 times more return on investment than Birks. However, Tapestry is 1.9 times less risky than Birks. It trades about 0.06 of its potential returns per unit of risk. Birks Group is currently generating about -0.05 per unit of risk. If you would invest  6,554  in Tapestry on December 28, 2024 and sell it today you would earn a total of  471.00  from holding Tapestry or generate 7.19% return on investment over 90 days.

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

Tapestry  vs.  Birks Group

Tapestry

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Tapestry are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile basic indicators, Tapestry may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Birks Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Birks Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite abnormal performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Tapestry and Birks

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

The idea behind Tapestry and Birks Group 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.