Correlation Between Carvana Co and Etsy

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

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

Diversification Opportunities for Carvana Co and Etsy

0.17
  Correlation Coefficient
Carvana Co Cl
Etsy Inc

Average diversification

The 12 months correlation between Carvana and Etsy is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Carvana Co Cl and Etsy Inc in the same portfolio assuming nothing else is changed. The correlation between historical prices or returns on Etsy Inc and Carvana Co 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 Carvana Co Cl 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 Carvana Co i.e., Carvana Co and Etsy go up and down completely randomly.

Pair Corralation between Carvana Co and Etsy

Given the investment horizon of 90 days Carvana Co Cl is expected to under-perform the Etsy. But the stock apears to be less risky and, when comparing its historical volatility, Carvana Co Cl is 1.09 times less risky than Etsy. The stock trades about -0.05 of its potential returns per unit of risk. The Etsy Inc is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  20,881  in Etsy Inc on October 20, 2021 and sell it today you would lose (4,532)  from holding Etsy Inc or give up 21.7% of portfolio value over 90 days.
Time Period12 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Carvana Co Cl  vs.  Etsy Inc

 Performance (%) 
      Timeline 
Carvana Co Cl 
Carvana Performance
0 of 100
Over the last 90 days Carvana Co Cl has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Carvana Price Channel

Etsy Inc 
Etsy Performance
0 of 100
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 current stock price disturbance, may contribute to short-term losses for the investors.

Etsy Price Channel

Carvana Co and Etsy Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with Carvana Co and Etsy

The main advantage of trading using opposite Carvana Co and Etsy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Carvana Co 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 Carvana Co Cl 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.
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.

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