Correlation Between Crocs and Yue Yuen
Can any of the company-specific risk be diversified away by investing in both Crocs and Yue Yuen 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 Yue Yuen into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Crocs Inc and Yue Yuen Industrial, you can compare the effects of market volatilities on Crocs and Yue Yuen 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 Yue Yuen. Check out your portfolio center. Please also check ongoing floating volatility patterns of Crocs and Yue Yuen.
Diversification Opportunities for Crocs and Yue Yuen
Pay attention - limited upside
The 3 months correlation between Crocs and Yue is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Crocs Inc and Yue Yuen Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yue Yuen Industrial 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 Yue Yuen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yue Yuen Industrial has no effect on the direction of Crocs i.e., Crocs and Yue Yuen go up and down completely randomly.
Pair Corralation between Crocs and Yue Yuen
Given the investment horizon of 90 days Crocs Inc is expected to under-perform the Yue Yuen. But the stock apears to be less risky and, when comparing its historical volatility, Crocs Inc is 1.05 times less risky than Yue Yuen. The stock trades about -0.04 of its potential returns per unit of risk. The Yue Yuen Industrial is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 848.00 in Yue Yuen Industrial on September 12, 2024 and sell it today you would earn a total of 338.00 from holding Yue Yuen Industrial or generate 39.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Crocs Inc vs. Yue Yuen Industrial
Performance |
| Timeline |
| Crocs Inc |
| Yue Yuen Industrial |
Crocs and Yue Yuen Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Crocs and Yue Yuen
The main advantage of trading using opposite Crocs and Yue Yuen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Crocs position performs unexpectedly, Yue Yuen 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 Yue Yuen will offset losses from the drop in Yue Yuen's long position.The idea behind Crocs Inc and Yue Yuen Industrial 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.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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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