Correlation Between Etsy and Five Below

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

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

Diversification Opportunities for Etsy and Five Below

0.74

Correlation Coefficient

Etsy  Five Below

Poor diversification

The 3 months correlation between Etsy and Five is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Etsy Inc and Five Below in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Five Below 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 Five Below. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Five Below has no effect on the direction of Etsy i.e., Etsy and Five Below go up and down completely randomly.

Pair Corralation between Etsy and Five Below

Assuming the 90 days horizon Etsy is expected to generate 1.86 times less return on investment than Five Below. But when comparing it to its historical volatility, Etsy Inc is 1.02 times less risky than Five Below. It trades about 0.18 of its potential returns per unit of risk. Five Below is currently generating about 0.32 of returns per unit of risk over similar time horizon. If you would invest  6,622  in Five Below on April 25, 2025 and sell it today you would earn a total of  5,148  from holding Five Below or generate 77.74% return on investment over 90 days.

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

Etsy Inc  vs.  Five Below

Etsy Inc

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Etsy Inc are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Etsy reported solid returns over the last few months and may actually be approaching a breakup point.

Five Below

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Five Below are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Five Below reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Etsy and Five Below

The main advantage of trading using opposite Etsy and Five Below positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Etsy position performs unexpectedly, Five Below 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 Five Below will offset losses from the drop in Five Below's long position.

The idea behind Etsy Inc and Five Below 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.