Correlation Between Chewy and Polished

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Can any of the company-specific risk be diversified away by investing in both Chewy and Polished 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 Chewy and Polished into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Chewy Inc and Polished, you can compare the effects of market volatilities on Chewy and Polished 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 Chewy with a short position of Polished. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chewy and Polished.

Diversification Opportunities for Chewy and Polished

0.52
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Chewy and Polished is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Chewy Inc and Polished in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Polished and Chewy 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 Chewy Inc are associated (or correlated) with Polished. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Polished has no effect on the direction of Chewy i.e., Chewy and Polished go up and down completely randomly.

Pair Corralation between Chewy and Polished

Given the investment horizon of 90 days Chewy Inc is expected to generate 0.75 times more return on investment than Polished. However, Chewy Inc is 1.33 times less risky than Polished. It trades about -0.03 of its potential returns per unit of risk. Polished is currently generating about -0.13 per unit of risk. If you would invest  4,319  in Chewy Inc on December 29, 2023 and sell it today you would lose (2,793) from holding Chewy Inc or give up 64.67% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy23.48%
ValuesDaily Returns

Chewy Inc  vs.  Polished

 Performance 
       Timeline  
Chewy Inc 

Risk-Adjusted Performance

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High
Very Weak
Over the last 90 days Chewy Inc 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 basic indicators remain fairly strong which may send shares a bit higher in April 2024. The current disturbance may also be a sign of long term up-swing for the company investors.
Polished 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days Polished has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Polished is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Chewy and Polished Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Chewy and Polished

The main advantage of trading using opposite Chewy and Polished positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chewy position performs unexpectedly, Polished 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 Polished will offset losses from the drop in Polished's long position.
The idea behind Chewy Inc and Polished 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.
Check out your portfolio center.
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 Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.

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