Correlation Between Aarons and Etsy

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

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

Diversification Opportunities for Aarons and Etsy

0.77

Correlation Coefficient

Aarons  Etsy

Poor diversification

The 3 months correlation between Aarons and Etsy is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding The Aarons and Etsy Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Etsy Inc and Aarons 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 The Aarons are associated (or correlated) with Etsy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Etsy Inc has no effect on the direction of Aarons i.e., Aarons and Etsy go up and down completely randomly.

Pair Corralation between Aarons and Etsy

Considering the 90-day investment horizon The Aarons is expected to generate 0.56 times more return on investment than Etsy. However, The Aarons is 1.77 times less risky than Etsy. It trades about 0.12 of its potential returns per unit of risk. Etsy Inc is currently generating about -0.07 per unit of risk. If you would invest  709.00  in The Aarons on February 13, 2024 and sell it today you would earn a total of  36.00  from holding The Aarons or generate 5.08% return on investment over 90 days.

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

The Aarons  vs.  Etsy Inc

Aarons

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Aarons has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in June 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Etsy Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Etsy Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in June 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Aarons and Etsy

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

The idea behind The Aarons and Etsy 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.