Correlation Between Skechers USA and Diamond Estates
Can any of the company-specific risk be diversified away by investing in both Skechers USA and Diamond Estates 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 Skechers USA and Diamond Estates into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Skechers USA and Diamond Estates Wines, you can compare the effects of market volatilities on Skechers USA and Diamond Estates 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 Skechers USA with a short position of Diamond Estates. Check out your portfolio center. Please also check ongoing floating volatility patterns of Skechers USA and Diamond Estates.
Diversification Opportunities for Skechers USA and Diamond Estates
0.06 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Skechers and Diamond is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Skechers USA and Diamond Estates Wines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diamond Estates Wines and Skechers USA 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 Skechers USA are associated (or correlated) with Diamond Estates. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diamond Estates Wines has no effect on the direction of Skechers USA i.e., Skechers USA and Diamond Estates go up and down completely randomly.
Pair Corralation between Skechers USA and Diamond Estates
Considering the 90-day investment horizon Skechers USA is expected to generate 0.95 times more return on investment than Diamond Estates. However, Skechers USA is 1.05 times less risky than Diamond Estates. It trades about 0.11 of its potential returns per unit of risk. Diamond Estates Wines is currently generating about 0.08 per unit of risk. If you would invest 6,044 in Skechers USA on February 2, 2024 and sell it today you would earn a total of 563.00 from holding Skechers USA or generate 9.32% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Skechers USA vs. Diamond Estates Wines
Performance |
Timeline |
Skechers USA |
Diamond Estates Wines |
Skechers USA and Diamond Estates Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Skechers USA and Diamond Estates
The main advantage of trading using opposite Skechers USA and Diamond Estates positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Skechers USA position performs unexpectedly, Diamond Estates 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 Diamond Estates will offset losses from the drop in Diamond Estates' long position.Skechers USA vs. Vera Bradley | Skechers USA vs. Steven Madden | Skechers USA vs. Wolverine World Wide | Skechers USA vs. Caleres |
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 the Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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