Correlation Between Deckers Outdoor and Leonardo SpA
Can any of the company-specific risk be diversified away by investing in both Deckers Outdoor and Leonardo SpA 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 Deckers Outdoor and Leonardo SpA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Deckers Outdoor and Leonardo SpA ADR, you can compare the effects of market volatilities on Deckers Outdoor and Leonardo SpA 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 Deckers Outdoor with a short position of Leonardo SpA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Deckers Outdoor and Leonardo SpA.
Diversification Opportunities for Deckers Outdoor and Leonardo SpA
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Deckers and Leonardo is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Deckers Outdoor and Leonardo SpA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leonardo SpA ADR and Deckers Outdoor 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 Deckers Outdoor are associated (or correlated) with Leonardo SpA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Leonardo SpA ADR has no effect on the direction of Deckers Outdoor i.e., Deckers Outdoor and Leonardo SpA go up and down completely randomly.
Pair Corralation between Deckers Outdoor and Leonardo SpA
Given the investment horizon of 90 days Deckers Outdoor is expected to generate 1.12 times more return on investment than Leonardo SpA. However, Deckers Outdoor is 1.12 times more volatile than Leonardo SpA ADR. It trades about 0.26 of its potential returns per unit of risk. Leonardo SpA ADR is currently generating about 0.22 per unit of risk. If you would invest 16,952 in Deckers Outdoor on August 31, 2024 and sell it today you would earn a total of 2,225 from holding Deckers Outdoor or generate 13.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Deckers Outdoor vs. Leonardo SpA ADR
Performance |
| Timeline |
| Deckers Outdoor |
| Leonardo SpA ADR |
Deckers Outdoor and Leonardo SpA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Deckers Outdoor and Leonardo SpA
The main advantage of trading using opposite Deckers Outdoor and Leonardo SpA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Deckers Outdoor position performs unexpectedly, Leonardo SpA 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 Leonardo SpA will offset losses from the drop in Leonardo SpA's long position.| Deckers Outdoor vs. On Holding | Deckers Outdoor vs. Skechers USA | Deckers Outdoor vs. Nike Inc | Deckers Outdoor vs. Steven Madden |
| Leonardo SpA vs. Leonardo Spa | Leonardo SpA vs. Thales SA ADR | Leonardo SpA vs. Safran SA | Leonardo SpA vs. Rheinmetall AG ADR |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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