Correlation Between Skechers USA and ESGEN Acquisition

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Can any of the company-specific risk be diversified away by investing in both Skechers USA and ESGEN Acquisition 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 ESGEN Acquisition into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Skechers USA and ESGEN Acquisition Corp, you can compare the effects of market volatilities on Skechers USA and ESGEN Acquisition 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 ESGEN Acquisition. Check out your portfolio center. Please also check ongoing floating volatility patterns of Skechers USA and ESGEN Acquisition.

Diversification Opportunities for Skechers USA and ESGEN Acquisition

-0.55
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Skechers and ESGEN is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Skechers USA and ESGEN Acquisition Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ESGEN Acquisition Corp 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 ESGEN Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ESGEN Acquisition Corp has no effect on the direction of Skechers USA i.e., Skechers USA and ESGEN Acquisition go up and down completely randomly.

Pair Corralation between Skechers USA and ESGEN Acquisition

Considering the 90-day investment horizon Skechers USA is expected to generate 2.62 times more return on investment than ESGEN Acquisition. However, Skechers USA is 2.62 times more volatile than ESGEN Acquisition Corp. It trades about 0.06 of its potential returns per unit of risk. ESGEN Acquisition Corp is currently generating about 0.07 per unit of risk. If you would invest  4,239  in Skechers USA on September 4, 2024 and sell it today you would earn a total of  2,326  from holding Skechers USA or generate 54.87% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy30.71%
ValuesDaily Returns

Skechers USA  vs.  ESGEN Acquisition Corp

 Performance 
       Timeline  
Skechers USA 

Risk-Adjusted Performance

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Weak
 
Strong
Very Weak
Over the last 90 days Skechers USA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong forward-looking signals, Skechers USA is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.
ESGEN Acquisition Corp 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days ESGEN Acquisition Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental indicators, ESGEN Acquisition is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Skechers USA and ESGEN Acquisition Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Skechers USA and ESGEN Acquisition

The main advantage of trading using opposite Skechers USA and ESGEN Acquisition positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Skechers USA position performs unexpectedly, ESGEN Acquisition 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 ESGEN Acquisition will offset losses from the drop in ESGEN Acquisition's long position.
The idea behind Skechers USA and ESGEN Acquisition Corp 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.
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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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.

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