Correlation Between Skechers USA and TEXTRON

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Can any of the company-specific risk be diversified away by investing in both Skechers USA and TEXTRON 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 TEXTRON into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Skechers USA and TEXTRON INC 4, you can compare the effects of market volatilities on Skechers USA and TEXTRON 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 TEXTRON. Check out your portfolio center. Please also check ongoing floating volatility patterns of Skechers USA and TEXTRON.

Diversification Opportunities for Skechers USA and TEXTRON

0.31
  Correlation Coefficient

Weak diversification

The 3 months correlation between Skechers and TEXTRON is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Skechers USA and TEXTRON INC 4 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TEXTRON INC 4 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 TEXTRON. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TEXTRON INC 4 has no effect on the direction of Skechers USA i.e., Skechers USA and TEXTRON go up and down completely randomly.

Pair Corralation between Skechers USA and TEXTRON

Considering the 90-day investment horizon Skechers USA is expected to generate 13.34 times more return on investment than TEXTRON. However, Skechers USA is 13.34 times more volatile than TEXTRON INC 4. It trades about 0.31 of its potential returns per unit of risk. TEXTRON INC 4 is currently generating about 0.03 per unit of risk. If you would invest  6,198  in Skechers USA on September 5, 2024 and sell it today you would earn a total of  867.00  from holding Skechers USA or generate 13.99% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy86.36%
ValuesDaily Returns

Skechers USA  vs.  TEXTRON INC 4

 Performance 
       Timeline  
Skechers USA 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Skechers USA are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating forward-looking signals, Skechers USA may actually be approaching a critical reversion point that can send shares even higher in January 2025.
TEXTRON INC 4 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days TEXTRON INC 4 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, TEXTRON is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Skechers USA and TEXTRON Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Skechers USA and TEXTRON

The main advantage of trading using opposite Skechers USA and TEXTRON positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Skechers USA position performs unexpectedly, TEXTRON 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 TEXTRON will offset losses from the drop in TEXTRON's long position.
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The idea behind Skechers USA and TEXTRON INC 4 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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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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