Correlation Between YETI Holdings and Chewy

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

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

Diversification Opportunities for YETI Holdings and Chewy

0.46

Correlation Coefficient

YETI Holdings  Chewy

Very weak diversification

The 3 months correlation between YETI and Chewy is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding YETI Holdings and Chewy Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chewy Inc and YETI Holdings 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 YETI Holdings are associated (or correlated) with Chewy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chewy Inc has no effect on the direction of YETI Holdings i.e., YETI Holdings and Chewy go up and down completely randomly.

Pair Corralation between YETI Holdings and Chewy

Given the investment horizon of 90 days YETI Holdings is expected to under-perform the Chewy. But the stock apears to be less risky and, when comparing its historical volatility, YETI Holdings is 1.36 times less risky than Chewy. The stock trades about -0.1 of its potential returns per unit of risk. The Chewy Inc is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  3,421  in Chewy Inc on December 28, 2024 and sell it today you would lose (152.00) from holding Chewy Inc or give up 4.44% of portfolio value over 90 days.

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

YETI Holdings  vs.  Chewy Inc

YETI Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days YETI Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Chewy Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Chewy Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Chewy is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with YETI Holdings and Chewy

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

The idea behind YETI Holdings and Chewy Inc 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.