Correlation Between Winmark and Tile Shop

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

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

Diversification Opportunities for Winmark and Tile Shop

-0.33

Correlation Coefficient

Winmark  Tile Shop

Very good diversification

The 3 months correlation between Winmark and Tile is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Winmark and Tile Shop Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tile Shop Holdings and Winmark 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 Winmark are associated (or correlated) with Tile Shop. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tile Shop Holdings has no effect on the direction of Winmark i.e., Winmark and Tile Shop go up and down completely randomly.

Pair Corralation between Winmark and Tile Shop

Given the investment horizon of 90 days Winmark is expected to generate 0.85 times more return on investment than Tile Shop. However, Winmark is 1.18 times less risky than Tile Shop. It trades about -0.02 of its potential returns per unit of risk. Tile Shop Holdings is currently generating about -0.04 per unit of risk. If you would invest  35,970  in Winmark on March 3, 2024 and sell it today you would lose (380.00) from holding Winmark or give up 1.06% of portfolio value over 90 days.

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

Winmark  vs.  Tile Shop Holdings

Winmark

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Winmark has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Winmark is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Tile Shop Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tile Shop Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Tile Shop is not utilizing all of its potentials. The newest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Winmark and Tile Shop

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

The idea behind Winmark and Tile Shop Holdings 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.