Correlation Between Tapestry and Lands End

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

By analyzing existing cross correlation between Tapestry and Lands End, you can compare the effects of market volatilities on Tapestry and Lands End 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 Lands End. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tapestry and Lands End.

Diversification Opportunities for Tapestry and Lands End

-0.71

Correlation Coefficient

Tapestry  Lands End

Pay attention - limited upside

The 3 months correlation between Tapestry and Lands is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Tapestry and Lands End in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lands End 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 Lands End. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lands End has no effect on the direction of Tapestry i.e., Tapestry and Lands End go up and down completely randomly.

Pair Corralation between Tapestry and Lands End

Considering the 90-day investment horizon Tapestry is expected to generate 0.77 times more return on investment than Lands End. However, Tapestry is 1.29 times less risky than Lands End. It trades about 0.21 of its potential returns per unit of risk. Lands End is currently generating about -0.09 per unit of risk. If you would invest  4,515  in Tapestry on September 24, 2024 and sell it today you would earn a total of  1,900  from holding Tapestry or generate 42.08% return on investment over 90 days.

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

Tapestry  vs.  Lands End

Tapestry

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Tapestry are ranked lower than 16 (%) 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.

Lands End

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lands End has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Tapestry and Lands End

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

The idea behind Tapestry and Lands End 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.