Correlation Between Etsy and Imedia Brands

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

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

Diversification Opportunities for Etsy and Imedia Brands

0.82
  Correlation Coefficient
Etsy Inc
Imedia Brands

Very poor diversification

The 3 months correlation between Etsy and Imedia is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Etsy Inc and Imedia Brands in the same portfolio assuming nothing else is changed. The correlation between historical prices or returns on Imedia Brands and Etsy 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 Etsy Inc are associated (or correlated) with Imedia Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Imedia Brands has no effect on the direction of Etsy i.e., Etsy and Imedia Brands go up and down completely randomly.

Pair Corralation between Etsy and Imedia Brands

Given the investment horizon of 90 days Etsy Inc is expected to generate 0.72 times more return on investment than Imedia Brands. However, Etsy Inc is 1.39 times less risky than Imedia Brands. It trades about 0.11 of its potential returns per unit of risk. Imedia Brands is currently generating about 0.06 per unit of risk. If you would invest  5,037  in Etsy Inc on August 31, 2021 and sell it today you would earn a total of  23,990  from holding Etsy Inc or generate 476.28% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Etsy Inc  vs.  Imedia Brands

 Performance (%) 
      Timeline 
Etsy Inc 
Etsy Performance
11 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Etsy Inc are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Etsy showed solid returns over the last few months and may actually be approaching a breakup point.

Etsy Price Channel

Imedia Brands 
Imedia Performance
8 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Imedia Brands are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental drivers, Imedia Brands reported solid returns over the last few months and may actually be approaching a breakup point.

Imedia Price Channel

Etsy and Imedia Brands Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with Etsy and Imedia Brands

The main advantage of trading using opposite Etsy and Imedia Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Etsy position performs unexpectedly, Imedia Brands 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 Imedia Brands will offset losses from the drop in Imedia Brands' long position.
The idea behind Etsy Inc and Imedia Brands 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.

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