Correlation Between Emerge Commerce and Chewy

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

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

Diversification Opportunities for Emerge Commerce and Chewy

0.19

Correlation Coefficient

Emerge Commerce  Chewy

Average diversification

The 3 months correlation between Emerge and Chewy is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Emerge Commerce and Chewy Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chewy Inc and Emerge Commerce 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 Emerge Commerce are associated (or correlated) with Chewy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chewy Inc has no effect on the direction of Emerge Commerce i.e., Emerge Commerce and Chewy go up and down completely randomly.

Pair Corralation between Emerge Commerce and Chewy

Assuming the 90 days horizon Emerge Commerce is expected to generate 12.62 times more return on investment than Chewy. However, Emerge Commerce is 12.62 times more volatile than Chewy Inc. It trades about 0.04 of its potential returns per unit of risk. Chewy Inc is currently generating about 0.01 per unit of risk. If you would invest  13.00  in Emerge Commerce on August 25, 2024 and sell it today you would lose (10.49) from holding Emerge Commerce or give up 80.69% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Emerge Commerce  vs.  Chewy Inc

Emerge Commerce

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Emerge Commerce are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain primary indicators, Emerge Commerce reported solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Emerge Commerce and Chewy

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

The idea behind Emerge Commerce and Chewy 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.

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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.