Correlation Between Skechers USA and Analog Devices
Can any of the company-specific risk be diversified away by investing in both Skechers USA and Analog Devices 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 Skechers USA and Analog Devices into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Skechers USA and Analog Devices, you can compare the effects of market volatilities on Skechers USA and Analog Devices 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 Skechers USA with a short position of Analog Devices. Check out your portfolio center. Please also check ongoing floating volatility patterns of Skechers USA and Analog Devices.
Diversification Opportunities for Skechers USA and Analog Devices
0.36 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Skechers and Analog is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Skechers USA and Analog Devices in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Analog Devices and Skechers USA 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 Skechers USA are associated (or correlated) with Analog Devices. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Analog Devices has no effect on the direction of Skechers USA i.e., Skechers USA and Analog Devices go up and down completely randomly.
Pair Corralation between Skechers USA and Analog Devices
Considering the 90-day investment horizon Skechers USA is expected to generate 3.31 times less return on investment than Analog Devices. In addition to that, Skechers USA is 1.01 times more volatile than Analog Devices. It trades about 0.01 of its total potential returns per unit of risk. Analog Devices is currently generating about 0.05 per unit of volatility. If you would invest 18,990 in Analog Devices on August 28, 2024 and sell it today you would earn a total of 3,368 from holding Analog Devices or generate 17.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Skechers USA vs. Analog Devices
Performance |
| Timeline |
| Skechers USA |
| Analog Devices |
Skechers USA and Analog Devices Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Skechers USA and Analog Devices
The main advantage of trading using opposite Skechers USA and Analog Devices positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Skechers USA position performs unexpectedly, Analog Devices 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 Analog Devices will offset losses from the drop in Analog Devices' long position.| 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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