Correlation Between Skechers USA and Western Sierra
Can any of the company-specific risk be diversified away by investing in both Skechers USA and Western Sierra 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 Western Sierra into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Skechers USA and Western Sierra Mining, you can compare the effects of market volatilities on Skechers USA and Western Sierra 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 Western Sierra. Check out your portfolio center. Please also check ongoing floating volatility patterns of Skechers USA and Western Sierra.
Diversification Opportunities for Skechers USA and Western Sierra
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Skechers and Western is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Skechers USA and Western Sierra Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Sierra Mining 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 Western Sierra. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Sierra Mining has no effect on the direction of Skechers USA i.e., Skechers USA and Western Sierra go up and down completely randomly.
Pair Corralation between Skechers USA and Western Sierra
Considering the 90-day investment horizon Skechers USA is expected to generate 102.44 times less return on investment than Western Sierra. But when comparing it to its historical volatility, Skechers USA is 52.92 times less risky than Western Sierra. It trades about 0.05 of its potential returns per unit of risk. Western Sierra Mining is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 8.45 in Western Sierra Mining on September 2, 2024 and sell it today you would lose (7.77) from holding Western Sierra Mining or give up 91.95% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.8% |
| Values | Daily Returns |
Skechers USA vs. Western Sierra Mining
Performance |
| Timeline |
| Skechers USA |
| Western Sierra Mining |
Skechers USA and Western Sierra Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Skechers USA and Western Sierra
The main advantage of trading using opposite Skechers USA and Western Sierra positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Skechers USA position performs unexpectedly, Western Sierra 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 Western Sierra will offset losses from the drop in Western Sierra's long position.| Skechers USA vs. Crocs Inc | Skechers USA vs. On Holding | Skechers USA vs. Nike Inc | Skechers USA vs. Designer Brands |
| Western Sierra vs. Holloman Energy Corp | Western Sierra vs. cbdMD Inc | Western Sierra vs. Evolus Inc | Western Sierra vs. CV Sciences |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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