Correlation Between Chewy and Etsy

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

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

Diversification Opportunities for Chewy and Etsy

0.49

Correlation Coefficient

Chewy  Etsy

Very weak diversification

The 3 months correlation between Chewy and Etsy is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Chewy Inc and Etsy Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Etsy Inc and Chewy 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 Chewy Inc 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 Chewy i.e., Chewy and Etsy go up and down completely randomly.

Pair Corralation between Chewy and Etsy

Given the investment horizon of 90 days Chewy is expected to generate 4.06 times less return on investment than Etsy. In addition to that, Chewy is 1.06 times more volatile than Etsy Inc. It trades about 0.02 of its total potential returns per unit of risk. Etsy Inc is currently generating about 0.09 per unit of volatility. If you would invest  5,174  in Etsy Inc on September 12, 2024 and sell it today you would earn a total of  702.00  from holding Etsy Inc or generate 13.57% return on investment over 90 days.

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

Chewy Inc  vs.  Etsy Inc

Chewy Inc

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Chewy Inc are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Etsy Inc

Risk-Adjusted Performance

7 of 100

OK

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

Pair Trading with Chewy and Etsy

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

Check out your portfolio center.

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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.