Correlation Between Signet Jewelers and Tapestry

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

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

Diversification Opportunities for Signet Jewelers and Tapestry

0.2

Correlation Coefficient

Signet Jewelers  Tapestry

Modest diversification

The 3 months correlation between Signet and Tapestry is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Signet Jewelers and Tapestry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tapestry and Signet Jewelers 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 Signet Jewelers are associated (or correlated) with Tapestry. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tapestry has no effect on the direction of Signet Jewelers i.e., Signet Jewelers and Tapestry go up and down completely randomly.

Pair Corralation between Signet Jewelers and Tapestry

Considering the 90-day investment horizon Signet Jewelers is expected to generate 1.34 times more return on investment than Tapestry. However, Signet Jewelers is 1.34 times more volatile than Tapestry. It trades about 0.14 of its potential returns per unit of risk. Tapestry is currently generating about 0.0 per unit of risk. If you would invest  4,846  in Signet Jewelers on March 1, 2025 and sell it today you would earn a total of  1,843  from holding Signet Jewelers or generate 38.03% return on investment over 90 days.

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

Signet Jewelers  vs.  Tapestry

Signet Jewelers

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Signet Jewelers are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak forward indicators, Signet Jewelers reported solid returns over the last few months and may actually be approaching a breakup point.

Tapestry

Risk-Adjusted Performance

Very Weak

Over the last 90 days Tapestry has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Tapestry is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Signet Jewelers and Tapestry

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

The idea behind Signet Jewelers and Tapestry 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.