Correlation Between Allbirds and Stitch Fix

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

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

Diversification Opportunities for Allbirds and Stitch Fix

-0.24

Correlation Coefficient

Allbirds  Stitch Fix

Very good diversification

The 3 months correlation between Allbirds and Stitch is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Allbirds and Stitch Fix in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stitch Fix and Allbirds 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 Allbirds are associated (or correlated) with Stitch Fix. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stitch Fix has no effect on the direction of Allbirds i.e., Allbirds and Stitch Fix go up and down completely randomly.

Pair Corralation between Allbirds and Stitch Fix

Given the investment horizon of 90 days Allbirds is expected to under-perform the Stitch Fix. But the stock apears to be less risky and, when comparing its historical volatility, Allbirds is 1.01 times less risky than Stitch Fix. The stock trades about -0.01 of its potential returns per unit of risk. The Stitch Fix is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  267.00  in Stitch Fix on September 2, 2024 and sell it today you would earn a total of  209.00  from holding Stitch Fix or generate 78.28% return on investment over 90 days.

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

Allbirds  vs.  Stitch Fix

Allbirds

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Allbirds has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Stitch Fix

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Stitch Fix are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating forward indicators, Stitch Fix showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Allbirds and Stitch Fix

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

The idea behind Allbirds and Stitch Fix 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.