Correlation Between Foot Locker and Etsy

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

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

Diversification Opportunities for Foot Locker and Etsy

0.83

Correlation Coefficient

Foot Locker  Etsy

Very poor diversification

The 3 months correlation between Foot and Etsy is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Foot Locker and Etsy Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Etsy Inc and Foot Locker 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 Foot Locker 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 Foot Locker i.e., Foot Locker and Etsy go up and down completely randomly.

Pair Corralation between Foot Locker and Etsy

Allowing for the 90-day total investment horizon Foot Locker is expected to under-perform the Etsy. In addition to that, Foot Locker is 1.43 times more volatile than Etsy Inc. It trades about -0.19 of its total potential returns per unit of risk. Etsy Inc is currently generating about -0.09 per unit of volatility. If you would invest  5,341  in Etsy Inc on January 14, 2025 and sell it today you would lose (976.00) from holding Etsy Inc or give up 18.27% of portfolio value over 90 days.

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

Foot Locker  vs.  Etsy Inc

Foot Locker

Risk-Adjusted Performance

Very Weak

Over the last 90 days Foot Locker has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's essential indicators remain quite persistent which may send shares a bit higher in May 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Etsy Inc

Risk-Adjusted Performance

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 inconsistent performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in May 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Foot Locker and Etsy

The main advantage of trading using opposite Foot Locker and Etsy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Foot Locker 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 Foot Locker 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.