Correlation Between Tandy Leather and Cowen

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

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

Diversification Opportunities for Tandy Leather and Cowen

0.39

Correlation Coefficient

Tandy Leather  Cowen

Weak diversification

The 3 months correlation between Tandy and Cowen is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Tandy Leather Factory and Cowen Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cowen Group and Tandy Leather 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 Tandy Leather Factory are associated (or correlated) with Cowen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cowen Group has no effect on the direction of Tandy Leather i.e., Tandy Leather and Cowen go up and down completely randomly.

Pair Corralation between Tandy Leather and Cowen

If you would invest  419.00  in Tandy Leather Factory on September 30, 2024 and sell it today you would earn a total of  65.00  from holding Tandy Leather Factory or generate 15.51% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	1.56%
Values	Daily Returns

Tandy Leather Factory  vs.  Cowen Group

Tandy Leather Factory

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Tandy Leather Factory are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile essential indicators, Tandy Leather reported solid returns over the last few months and may actually be approaching a breakup point.

Cowen Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cowen Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Cowen is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Tandy Leather and Cowen

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

The idea behind Tandy Leather Factory and Cowen Group 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.