Correlation Between Tandy Leather and Pinterest

Can any of the company-specific risk be diversified away by investing in both Tandy Leather and Pinterest 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 Pinterest 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 Pinterest, you can compare the effects of market volatilities on Tandy Leather and Pinterest 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 Pinterest. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tandy Leather and Pinterest.

Diversification Opportunities for Tandy Leather and Pinterest

0.63

Correlation Coefficient

Tandy Leather  Pinterest

Poor diversification

The 3 months correlation between Tandy and Pinterest is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Tandy Leather Factory and Pinterest in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pinterest 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 Pinterest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pinterest has no effect on the direction of Tandy Leather i.e., Tandy Leather and Pinterest go up and down completely randomly.

Pair Corralation between Tandy Leather and Pinterest

Considering the 90-day investment horizon Tandy Leather Factory is expected to generate 0.7 times more return on investment than Pinterest. However, Tandy Leather Factory is 1.43 times less risky than Pinterest. It trades about -0.03 of its potential returns per unit of risk. Pinterest is currently generating about -0.09 per unit of risk. If you would invest  446.00  in Tandy Leather Factory on September 5, 2024 and sell it today you would lose (41.00) from holding Tandy Leather Factory or give up 9.19% of portfolio value over 90 days.

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

Tandy Leather Factory  vs.  Pinterest

Tandy Leather Factory

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tandy Leather Factory has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable essential indicators, Tandy Leather is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pinterest

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Pinterest are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Pinterest is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Tandy Leather and Pinterest

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

The idea behind Tandy Leather Factory and Pinterest 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.