Correlation Between Farfetch and AKA Brands

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

Diversification Opportunities for Farfetch and AKA Brands

0.81
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Farfetch and AKA Brands is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Farfetch Ltd Cl and AKA Brands Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AKA Brands Holding and Farfetch 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 Farfetch Ltd Cl are associated (or correlated) with AKA Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AKA Brands Holding has no effect on the direction of Farfetch i.e., Farfetch and AKA Brands go up and down completely randomly.

Pair Corralation between Farfetch and AKA Brands

Given the investment horizon of 90 days Farfetch Ltd Cl is expected to generate 1.75 times more return on investment than AKA Brands. However, Farfetch is 1.75 times more volatile than AKA Brands Holding. It trades about -0.06 of its potential returns per unit of risk. AKA Brands Holding is currently generating about -0.31 per unit of risk. If you would invest  897.00  in Farfetch Ltd Cl on April 1, 2022 and sell it today you would lose (137.00)  from holding Farfetch Ltd Cl or give up 15.27% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Farfetch Ltd Cl  vs.  AKA Brands Holding

 Performance (%) 
      Timeline 
Farfetch Ltd Cl 
Farfetch Performance
0 of 100
Over the last 90 days Farfetch Ltd Cl has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental indicators remain nearly stable which may send shares a bit higher in July 2022. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Farfetch Price Channel

AKA Brands Holding 
AKA Brands Performance
0 of 100
Over the last 90 days AKA Brands Holding has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's forward-looking signals remain somewhat strong which may send shares a bit higher in July 2022. The current disturbance may also be a sign of long term up-swing for the company investors.

Structure and Payout Changes

Last Split Factor
1:1
Last Split Date
2010-03-30

AKA Brands Price Channel

Farfetch and AKA Brands Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with Farfetch and AKA Brands

The main advantage of trading using opposite Farfetch and AKA Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Farfetch position performs unexpectedly, AKA 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 AKA Brands will offset losses from the drop in AKA Brands' long position.
The idea behind Farfetch Ltd Cl and AKA Brands Holding 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.

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