Correlation Between Chewy and Overstockcom

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

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

Diversification Opportunities for Chewy and Overstockcom

0.48

Correlation Coefficient

Chewy  Overstockcom

Very weak diversification

The 3 months correlation between Chewy and Overstockcom is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Chewy Inc and Overstockcom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Overstockcom 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 Overstockcom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Overstockcom has no effect on the direction of Chewy i.e., Chewy and Overstockcom go up and down completely randomly.

Pair Corralation between Chewy and Overstockcom

If you would invest  1,858  in Chewy Inc on August 25, 2024 and sell it today you would earn a total of  1,631  from holding Chewy Inc or generate 87.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	0.37%
Values	Daily Returns

Chewy Inc  vs.  Overstockcom

Chewy Inc

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Chewy Inc are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Chewy showed solid returns over the last few months and may actually be approaching a breakup point.

Overstockcom

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Overstockcom has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Overstockcom is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Chewy and Overstockcom

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

The idea behind Chewy Inc and Overstockcom 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.