Correlation Between Tapestry and YETI Holdings

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

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

Diversification Opportunities for Tapestry and YETI Holdings

-0.01

Correlation Coefficient

Tapestry  YETI Holdings

Good diversification

The 3 months correlation between Tapestry and YETI is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Tapestry and YETI Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on YETI Holdings 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 YETI Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of YETI Holdings has no effect on the direction of Tapestry i.e., Tapestry and YETI Holdings go up and down completely randomly.

Pair Corralation between Tapestry and YETI Holdings

Considering the 90-day investment horizon Tapestry is expected to generate 1.23 times more return on investment than YETI Holdings. However, Tapestry is 1.23 times more volatile than YETI Holdings. It trades about 0.24 of its potential returns per unit of risk. YETI Holdings is currently generating about 0.01 per unit of risk. If you would invest  4,062  in Tapestry on August 30, 2024 and sell it today you would earn a total of  2,030  from holding Tapestry or generate 49.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Tapestry  vs.  YETI Holdings

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.

YETI Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days YETI Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, YETI Holdings is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Tapestry and YETI Holdings

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

The idea behind Tapestry and YETI Holdings 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.