Correlation Between Etsy and Evgo

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

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

Diversification Opportunities for Etsy and Evgo

-0.48

Correlation Coefficient

Etsy  Evgo

Very good diversification

The 3 months correlation between Etsy and Evgo is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Etsy Inc and Evgo Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Evgo Inc and Etsy 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 Etsy Inc are associated (or correlated) with Evgo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Evgo Inc has no effect on the direction of Etsy i.e., Etsy and Evgo go up and down completely randomly.

Pair Corralation between Etsy and Evgo

Given the investment horizon of 90 days Etsy Inc is expected to generate 0.41 times more return on investment than Evgo. However, Etsy Inc is 2.42 times less risky than Evgo. It trades about -0.01 of its potential returns per unit of risk. Evgo Inc is currently generating about -0.3 per unit of risk. If you would invest  5,568  in Etsy Inc on September 25, 2024 and sell it today you would lose (55.00) from holding Etsy Inc or give up 0.99% of portfolio value over 90 days.

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

Etsy Inc  vs.  Evgo Inc

Etsy Inc

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Etsy Inc are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Etsy is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Evgo Inc

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Evgo Inc are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, Evgo displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Etsy and Evgo

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

The idea behind Etsy Inc and Evgo 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.