Correlation Between Shoe Carnival and Skechers USA
Can any of the company-specific risk be diversified away by investing in both Shoe Carnival 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 Shoe Carnival and Skechers USA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Shoe Carnival and Skechers USA, you can compare the effects of market volatilities on Shoe Carnival 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 Shoe Carnival with a short position of Skechers USA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shoe Carnival and Skechers USA.
Diversification Opportunities for Shoe Carnival and Skechers USA
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Shoe and Skechers is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Shoe Carnival and Skechers USA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Skechers USA and Shoe Carnival 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 Shoe Carnival 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 Shoe Carnival i.e., Shoe Carnival and Skechers USA go up and down completely randomly.
Pair Corralation between Shoe Carnival and Skechers USA
Given the investment horizon of 90 days Shoe Carnival is expected to generate 1.34 times more return on investment than Skechers USA. However, Shoe Carnival is 1.34 times more volatile than Skechers USA. It trades about 0.04 of its potential returns per unit of risk. Skechers USA is currently generating about 0.05 per unit of risk. If you would invest 2,311 in Shoe Carnival on September 1, 2024 and sell it today you would earn a total of 1,065 from holding Shoe Carnival or generate 46.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Shoe Carnival vs. Skechers USA
Performance |
| Timeline |
| Shoe Carnival |
| Skechers USA |
Shoe Carnival and Skechers USA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Shoe Carnival and Skechers USA
The main advantage of trading using opposite Shoe Carnival and Skechers USA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shoe Carnival 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.| Shoe Carnival vs. Citi Trends | Shoe Carnival vs. Zumiez Inc | Shoe Carnival vs. Buckle Inc | Shoe Carnival vs. Cato Corporation |
| Skechers USA vs. Deckers Outdoor | Skechers USA vs. On Holding | Skechers USA vs. Crocs 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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