Correlation Between Tapestry and Levi Strauss

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

By analyzing existing cross correlation between Tapestry and Levi Strauss Co, you can compare the effects of market volatilities on Tapestry and Levi Strauss 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 Levi Strauss. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tapestry and Levi Strauss.

Diversification Opportunities for Tapestry and Levi Strauss

-0.64

Correlation Coefficient

Tapestry  Levi Strauss

Excellent diversification

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

Pair Corralation between Tapestry and Levi Strauss

Considering the 90-day investment horizon Tapestry is expected to generate 0.95 times more return on investment than Levi Strauss. However, Tapestry is 1.05 times less risky than Levi Strauss. It trades about 0.06 of its potential returns per unit of risk. Levi Strauss Co is currently generating about 0.02 per unit of risk. If you would invest  3,614  in Tapestry on September 3, 2024 and sell it today you would earn a total of  2,614  from holding Tapestry or generate 72.33% return on investment over 90 days.

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

Tapestry  vs.  Levi Strauss Co

Tapestry

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Tapestry are ranked lower than 19 (%) 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.

Levi Strauss

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Levi Strauss Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with Tapestry and Levi Strauss

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

The idea behind Tapestry and Levi Strauss Co 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.