Correlation Between Tempur Sealy and Purple Innovation

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

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

Diversification Opportunities for Tempur Sealy and Purple Innovation

-0.05

Correlation Coefficient

Tempur Sealy  Purple Innovation

Good diversification

The 3 months correlation between Tempur and Purple is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Tempur Sealy International and Purple Innovation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Purple Innovation and Tempur Sealy 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 Tempur Sealy International are associated (or correlated) with Purple Innovation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Purple Innovation has no effect on the direction of Tempur Sealy i.e., Tempur Sealy and Purple Innovation go up and down completely randomly.

Pair Corralation between Tempur Sealy and Purple Innovation

Considering the 90-day investment horizon Tempur Sealy International is expected to generate 0.57 times more return on investment than Purple Innovation. However, Tempur Sealy International is 1.76 times less risky than Purple Innovation. It trades about 0.32 of its potential returns per unit of risk. Purple Innovation is currently generating about 0.1 per unit of risk. If you would invest  4,779  in Tempur Sealy International on September 1, 2024 and sell it today you would earn a total of  819.00  from holding Tempur Sealy International or generate 17.14% return on investment over 90 days.

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

Tempur Sealy International  vs.  Purple Innovation

Tempur Sealy Interna

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Tempur Sealy International are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Tempur Sealy may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Purple Innovation

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Purple Innovation has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Tempur Sealy and Purple Innovation

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

The idea behind Tempur Sealy International and Purple Innovation 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.