Correlation Between Under Armour and Tapestry

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

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

Diversification Opportunities for Under Armour and Tapestry

-0.73

Correlation Coefficient

Under Armour  Tapestry

Pay attention - limited upside

The 3 months correlation between Under and Tapestry is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Under Armour A and Tapestry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tapestry and Under Armour 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 Under Armour A are associated (or correlated) with Tapestry. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tapestry has no effect on the direction of Under Armour i.e., Under Armour and Tapestry go up and down completely randomly.

Pair Corralation between Under Armour and Tapestry

Considering the 90-day investment horizon Under Armour A is expected to under-perform the Tapestry. But the stock apears to be less risky and, when comparing its historical volatility, Under Armour A is 1.1 times less risky than Tapestry. The stock trades about -0.15 of its potential returns per unit of risk. The Tapestry is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  6,239  in Tapestry on December 19, 2024 and sell it today you would earn a total of  858.00  from holding Tapestry or generate 13.75% return on investment over 90 days.

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

Under Armour A  vs.  Tapestry

Under Armour A

Risk-Adjusted Performance

Very Weak

Over the last 90 days Under Armour A has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Tapestry

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tapestry are ranked lower than 7 (%) 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.

Pair Trading with Under Armour and Tapestry

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

The idea behind Under Armour A and Tapestry 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.