Correlation Between YETI Holdings and Tapestry

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

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

Diversification Opportunities for YETI Holdings and Tapestry

0.05

Correlation Coefficient

YETI Holdings  Tapestry

Significant diversification

The 3 months correlation between YETI and Tapestry is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding YETI Holdings and Tapestry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tapestry 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 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 YETI Holdings i.e., YETI Holdings and Tapestry go up and down completely randomly.

Pair Corralation between YETI Holdings and Tapestry

Given the investment horizon of 90 days YETI Holdings is expected to under-perform the Tapestry. But the stock apears to be less risky and, when comparing its historical volatility, YETI Holdings is 1.34 times less risky than Tapestry. The stock trades about -0.12 of its potential returns per unit of risk. The Tapestry is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  6,554  in Tapestry on December 28, 2024 and sell it today you would earn a total of  471.00  from holding Tapestry or generate 7.19% return on investment over 90 days.

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

YETI Holdings  vs.  Tapestry

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 fragile performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Tapestry

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Tapestry are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile basic indicators, Tapestry may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with YETI Holdings and Tapestry

The main advantage of trading using opposite YETI Holdings and Tapestry positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if YETI Holdings 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 YETI Holdings 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.

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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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.