Correlation Between Honest and Skechers USA
Can any of the company-specific risk be diversified away by investing in both Honest and Skechers USA 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 Honest and Skechers USA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Honest Company and Skechers USA, you can compare the effects of market volatilities on Honest and Skechers USA 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 Honest with a short position of Skechers USA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Honest and Skechers USA.
Diversification Opportunities for Honest and Skechers USA
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Honest and Skechers is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Honest Company and Skechers USA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Skechers USA and Honest 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 Honest Company are associated (or correlated) with Skechers USA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Skechers USA has no effect on the direction of Honest i.e., Honest and Skechers USA go up and down completely randomly.
Pair Corralation between Honest and Skechers USA
Given the investment horizon of 90 days Honest Company is expected to generate 2.26 times more return on investment than Skechers USA. However, Honest is 2.26 times more volatile than Skechers USA. It trades about 0.08 of its potential returns per unit of risk. Skechers USA is currently generating about 0.07 per unit of risk. If you would invest 335.00 in Honest Company on November 3, 2024 and sell it today you would earn a total of 306.00 from holding Honest Company or generate 91.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Honest Company vs. Skechers USA
Performance |
| Timeline |
| Honest Company |
| Skechers USA |
Honest and Skechers USA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Honest and Skechers USA
The main advantage of trading using opposite Honest and Skechers USA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Honest position performs unexpectedly, Skechers USA 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 Skechers USA will offset losses from the drop in Skechers USA's long position.| Honest vs. Estee Lauder Companies | Honest vs. Hims Hers Health | Honest vs. Procter Gamble | Honest vs. Coty Inc |
| Skechers USA vs. Crocs Inc | Skechers USA vs. On Holding | Skechers USA vs. Nike Inc | Skechers USA vs. Designer Brands |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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