Correlation Between Etsy and OReilly Automotive

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

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

Diversification Opportunities for Etsy and OReilly Automotive

-0.42

Correlation Coefficient

Etsy  OReilly Automotive

Very good diversification

The 3 months correlation between Etsy and OReilly is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Etsy Inc and OReilly Automotive in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OReilly Automotive 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 OReilly Automotive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OReilly Automotive has no effect on the direction of Etsy i.e., Etsy and OReilly Automotive go up and down completely randomly.

Pair Corralation between Etsy and OReilly Automotive

Assuming the 90 days horizon Etsy Inc is expected to generate 1.93 times more return on investment than OReilly Automotive. However, Etsy is 1.93 times more volatile than OReilly Automotive. It trades about 0.14 of its potential returns per unit of risk. OReilly Automotive is currently generating about -0.04 per unit of risk. If you would invest  4,046  in Etsy Inc on April 23, 2025 and sell it today you would earn a total of  1,053  from holding Etsy Inc or generate 26.03% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Etsy Inc  vs.  OReilly Automotive

Etsy Inc

Risk-Adjusted Performance

Good

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. Despite nearly fragile basic indicators, Etsy reported solid returns over the last few months and may actually be approaching a breakup point.

OReilly Automotive

Risk-Adjusted Performance

Very Weak

Over the last 90 days OReilly Automotive has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, OReilly Automotive is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Etsy and OReilly Automotive

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

The idea behind Etsy Inc and OReilly Automotive 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.