Correlation Between Tapestry and Green Brick

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

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

Diversification Opportunities for Tapestry and Green Brick

-0.81

Correlation Coefficient

Tapestry  Green Brick

Pay attention - limited upside

The 3 months correlation between Tapestry and Green is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding Tapestry and Green Brick Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Green Brick Partners and Tapestry 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 Tapestry are associated (or correlated) with Green Brick. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Green Brick Partners has no effect on the direction of Tapestry i.e., Tapestry and Green Brick go up and down completely randomly.

Pair Corralation between Tapestry and Green Brick

Considering the 90-day investment horizon Tapestry is expected to generate 1.17 times more return on investment than Green Brick. However, Tapestry is 1.17 times more volatile than Green Brick Partners. It trades about 0.22 of its potential returns per unit of risk. Green Brick Partners is currently generating about -0.21 per unit of risk. If you would invest  4,388  in Tapestry on September 22, 2024 and sell it today you would earn a total of  2,027  from holding Tapestry or generate 46.19% return on investment over 90 days.

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

Tapestry  vs.  Green Brick Partners

Tapestry

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Tapestry are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile basic indicators, Tapestry reported solid returns over the last few months and may actually be approaching a breakup point.

Green Brick Partners

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Green Brick Partners has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's fundamental drivers remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Tapestry and Green Brick

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

The idea behind Tapestry and Green Brick Partners 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.