Correlation Between Boohoo PLC and Etsy

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

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

Diversification Opportunities for Boohoo PLC and Etsy

0.4

Correlation Coefficient

Boohoo PLC  Etsy

Very weak diversification

The 3 months correlation between Boohoo and Etsy is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding BoohooCom PLC ADR and Etsy Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Etsy Inc and Boohoo PLC 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 BoohooCom PLC ADR are associated (or correlated) with Etsy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Etsy Inc has no effect on the direction of Boohoo PLC i.e., Boohoo PLC and Etsy go up and down completely randomly.

Pair Corralation between Boohoo PLC and Etsy

Assuming the 90 days horizon BoohooCom PLC ADR is expected to generate 1.02 times more return on investment than Etsy. However, Boohoo PLC is 1.02 times more volatile than Etsy Inc. It trades about -0.01 of its potential returns per unit of risk. Etsy Inc is currently generating about -0.05 per unit of risk. If you would invest  1,151  in BoohooCom PLC ADR on September 7, 2024 and sell it today you would lose (330.00) from holding BoohooCom PLC ADR or give up 28.67% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.79%
Values	Daily Returns

BoohooCom PLC ADR  vs.  Etsy Inc

BoohooCom PLC ADR

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in BoohooCom PLC ADR are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Boohoo PLC showed solid returns over the last few months and may actually be approaching a breakup point.

Etsy Inc

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Etsy Inc are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, Etsy may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Boohoo PLC and Etsy

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

The idea behind BoohooCom PLC ADR and Etsy 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.