Correlation Between Tapestry and Thor Industries

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

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

Diversification Opportunities for Tapestry and Thor Industries

-0.55

Correlation Coefficient

Tapestry  Thor Industries

Excellent diversification

The 3 months correlation between Tapestry and Thor is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Tapestry and Thor Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thor Industries 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 Thor Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thor Industries has no effect on the direction of Tapestry i.e., Tapestry and Thor Industries go up and down completely randomly.

Pair Corralation between Tapestry and Thor Industries

Considering the 90-day investment horizon Tapestry is expected to generate 0.89 times more return on investment than Thor Industries. However, Tapestry is 1.12 times less risky than Thor Industries. It trades about 0.34 of its potential returns per unit of risk. Thor Industries is currently generating about -0.3 per unit of risk. If you would invest  6,227  in Tapestry on October 10, 2024 and sell it today you would earn a total of  626.00  from holding Tapestry or generate 10.05% 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.  Thor Industries

Tapestry

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Tapestry are ranked lower than 21 (%) 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.

Thor Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Thor Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's technical indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Tapestry and Thor Industries

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

The idea behind Tapestry and Thor Industries 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.