Correlation Between Zumiez and Torrid Holdings

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

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

Diversification Opportunities for Zumiez and Torrid Holdings

-0.36

Correlation Coefficient

Zumiez  Torrid Holdings

Very good diversification

The 3 months correlation between Zumiez and Torrid is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Zumiez Inc and Torrid Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Torrid Holdings and Zumiez 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 Zumiez Inc are associated (or correlated) with Torrid Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Torrid Holdings has no effect on the direction of Zumiez i.e., Zumiez and Torrid Holdings go up and down completely randomly.

Pair Corralation between Zumiez and Torrid Holdings

Given the investment horizon of 90 days Zumiez is expected to generate 5.68 times less return on investment than Torrid Holdings. But when comparing it to its historical volatility, Zumiez Inc is 1.82 times less risky than Torrid Holdings. It trades about 0.01 of its potential returns per unit of risk. Torrid Holdings is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  425.00  in Torrid Holdings on September 28, 2024 and sell it today you would earn a total of  72.00  from holding Torrid Holdings or generate 16.94% return on investment over 90 days.

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

Zumiez Inc  vs.  Torrid Holdings

Zumiez Inc

Risk-Adjusted Performance

0 of 100

Very Weak

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

Torrid Holdings

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Torrid Holdings are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Torrid Holdings showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Zumiez and Torrid Holdings

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

The idea behind Zumiez Inc and Torrid Holdings 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.