Correlation Between 06050WHM0 and Tandy Leather

Can any of the company-specific risk be diversified away by investing in both 06050WHM0 and Tandy Leather 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 06050WHM0 and Tandy Leather into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between US06050WHM01 and Tandy Leather Factory, you can compare the effects of market volatilities on 06050WHM0 and Tandy Leather 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 06050WHM0 with a short position of Tandy Leather. Check out your portfolio center. Please also check ongoing floating volatility patterns of 06050WHM0 and Tandy Leather.

Diversification Opportunities for 06050WHM0 and Tandy Leather

-0.2

Correlation Coefficient

06050WHM0  Tandy Leather

Good diversification

The 3 months correlation between 06050WHM0 and Tandy is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding US06050WHM01 and Tandy Leather Factory in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tandy Leather Factory and 06050WHM0 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 US06050WHM01 are associated (or correlated) with Tandy Leather. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tandy Leather Factory has no effect on the direction of 06050WHM0 i.e., 06050WHM0 and Tandy Leather go up and down completely randomly.

Pair Corralation between 06050WHM0 and Tandy Leather

Assuming the 90 days trading horizon US06050WHM01 is expected to under-perform the Tandy Leather. But the bond apears to be less risky and, when comparing its historical volatility, US06050WHM01 is 2.05 times less risky than Tandy Leather. The bond trades about -0.09 of its potential returns per unit of risk. The Tandy Leather Factory is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  420.00  in Tandy Leather Factory on September 14, 2024 and sell it today you would earn a total of  61.00  from holding Tandy Leather Factory or generate 14.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	61.9%
Values	Daily Returns

US06050WHM01  vs.  Tandy Leather Factory

US06050WHM01

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days US06050WHM01 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Bond's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for US06050WHM01 investors.

Tandy Leather Factory

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tandy Leather Factory are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile essential indicators, Tandy Leather reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with 06050WHM0 and Tandy Leather

The main advantage of trading using opposite 06050WHM0 and Tandy Leather positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 06050WHM0 position performs unexpectedly, Tandy Leather 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 Tandy Leather will offset losses from the drop in Tandy Leather's long position.

The idea behind US06050WHM01 and Tandy Leather Factory 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.