Correlation Between Crocs and Adidas AG
Can any of the company-specific risk be diversified away by investing in both Crocs and Adidas AG 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 Crocs and Adidas AG into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Crocs Inc and Adidas AG ADR, you can compare the effects of market volatilities on Crocs and Adidas AG 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 Crocs with a short position of Adidas AG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Crocs and Adidas AG.
Diversification Opportunities for Crocs and Adidas AG
Poor diversification
The 3 months correlation between Crocs and Adidas is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Crocs Inc and Adidas AG ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adidas AG ADR and Crocs 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 Crocs Inc are associated (or correlated) with Adidas AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Adidas AG ADR has no effect on the direction of Crocs i.e., Crocs and Adidas AG go up and down completely randomly.
Pair Corralation between Crocs and Adidas AG
Given the investment horizon of 90 days Crocs Inc is expected to under-perform the Adidas AG. In addition to that, Crocs is 2.2 times more volatile than Adidas AG ADR. It trades about -0.23 of its total potential returns per unit of risk. Adidas AG ADR is currently generating about -0.06 per unit of volatility. If you would invest 11,532 in Adidas AG ADR on August 28, 2024 and sell it today you would lose (361.00) from holding Adidas AG ADR or give up 3.13% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Crocs Inc vs. Adidas AG ADR
Performance |
| Timeline |
| Crocs Inc |
| Adidas AG ADR |
Crocs and Adidas AG Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Crocs and Adidas AG
The main advantage of trading using opposite Crocs and Adidas AG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Crocs position performs unexpectedly, Adidas AG 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 Adidas AG will offset losses from the drop in Adidas AG's long position.The idea behind Crocs Inc and Adidas AG ADR 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.| Adidas AG vs. ASICS | Adidas AG vs. Asics Corp ADR | Adidas AG vs. American Rebel Holdings | Adidas AG vs. American Rebel Holdings |
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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
Other Complementary Tools
| Sync Your Broker Sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors. | |
| FinTech Suite Use AI to screen and filter profitable investment opportunities | |
| Bond Analysis Evaluate and analyze corporate bonds as a potential investment for your portfolios. | |
| Earnings Calls Check upcoming earnings announcements updated hourly across public exchanges | |
| Commodity Channel Use Commodity Channel Index to analyze current equity momentum |