Correlation Between LightInTheBox Holding and Etsy

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

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

Diversification Opportunities for LightInTheBox Holding and Etsy

0.67

Correlation Coefficient

LightInTheBox Holding  Etsy

Poor diversification

The 3 months correlation between LightInTheBox and Etsy is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding LightInTheBox Holding Co and Etsy Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Etsy Inc and LightInTheBox Holding 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 LightInTheBox Holding Co 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 LightInTheBox Holding i.e., LightInTheBox Holding and Etsy go up and down completely randomly.

Pair Corralation between LightInTheBox Holding and Etsy

Given the investment horizon of 90 days LightInTheBox Holding Co is expected to generate 3.24 times more return on investment than Etsy. However, LightInTheBox Holding is 3.24 times more volatile than Etsy Inc. It trades about 0.07 of its potential returns per unit of risk. Etsy Inc is currently generating about 0.03 per unit of risk. If you would invest  74.00  in LightInTheBox Holding Co on January 19, 2024 and sell it today you would earn a total of  4.00  from holding LightInTheBox Holding Co or generate 5.41% return on investment over 90 days.

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

LightInTheBox Holding Co  vs.  Etsy Inc

LightInTheBox Holding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LightInTheBox Holding Co 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 basic indicators remain somewhat strong which may send shares a bit higher in May 2024. The current disturbance may also be a sign of long term up-swing for the company 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 fairly strong basic indicators, Etsy is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with LightInTheBox Holding and Etsy

The main advantage of trading using opposite LightInTheBox Holding and Etsy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LightInTheBox Holding 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 LightInTheBox Holding Co 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..