Correlation Between Chewy and Lightinthebox Holding

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

Diversification Opportunities for Chewy and Lightinthebox Holding

-0.23
  Correlation Coefficient

Very good diversification

The 3 months correlation between Chewy and Lightinthebox is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Chewy Inc and Lightinthebox Holding Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lightinthebox Holding 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 Lightinthebox Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lightinthebox Holding has no effect on the direction of Chewy i.e., Chewy and Lightinthebox Holding go up and down completely randomly.

Pair Corralation between Chewy and Lightinthebox Holding

Given the investment horizon of 90 days Chewy Inc is expected to under-perform the Lightinthebox Holding. But the stock apears to be less risky and, when comparing its historical volatility, Chewy Inc is 1.56 times less risky than Lightinthebox Holding. The stock trades about -0.01 of its potential returns per unit of risk. The Lightinthebox Holding Co is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  81.00  in Lightinthebox Holding Co on February 27, 2022 and sell it today you would earn a total of  36.00  from holding Lightinthebox Holding Co or generate 44.44% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Chewy Inc  vs.  Lightinthebox Holding Co

 Performance (%) 
      Timeline 
Chewy Inc 
Chewy Performance
0 of 100
Over the last 90 days Chewy Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in June 2022. The current disturbance may also be a sign of long term up-swing for the company investors.

Chewy Price Channel

Lightinthebox Holding 
Lightinthebox Performance
0 of 100
Over the last 90 days Lightinthebox Holding Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Lightinthebox Holding is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Lightinthebox Price Channel

Chewy and Lightinthebox Holding Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with Chewy and Lightinthebox Holding

The main advantage of trading using opposite Chewy and Lightinthebox Holding positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chewy position performs unexpectedly, Lightinthebox Holding 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 Lightinthebox Holding will offset losses from the drop in Lightinthebox Holding's long position.
The idea behind Chewy Inc and Lightinthebox Holding Co 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.

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