Correlation Between WisdomTree Investments and Deckers Outdoor

Can any of the company-specific risk be diversified away by investing in both WisdomTree Investments and Deckers Outdoor 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 WisdomTree Investments and Deckers Outdoor into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between WisdomTree Investments and Deckers Outdoor, you can compare the effects of market volatilities on WisdomTree Investments and Deckers Outdoor 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 WisdomTree Investments with a short position of Deckers Outdoor. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree Investments and Deckers Outdoor.

Diversification Opportunities for WisdomTree Investments and Deckers Outdoor

0.2

Correlation Coefficient

WisdomTree Investments  Deckers Outdoor

Modest diversification

The 3 months correlation between WisdomTree and Deckers is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree Investments and Deckers Outdoor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deckers Outdoor and WisdomTree Investments 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 WisdomTree Investments are associated (or correlated) with Deckers Outdoor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Deckers Outdoor has no effect on the direction of WisdomTree Investments i.e., WisdomTree Investments and Deckers Outdoor go up and down completely randomly.

Pair Corralation between WisdomTree Investments and Deckers Outdoor

Assuming the 90 days horizon WisdomTree Investments is expected to under-perform the Deckers Outdoor. In addition to that, WisdomTree Investments is 1.18 times more volatile than Deckers Outdoor. It trades about 0.0 of its total potential returns per unit of risk. Deckers Outdoor is currently generating about 0.2 per unit of volatility. If you would invest  15,935  in Deckers Outdoor on October 25, 2024 and sell it today you would earn a total of  4,625  from holding Deckers Outdoor or generate 29.02% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

WisdomTree Investments  vs.  Deckers Outdoor

WisdomTree Investments

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WisdomTree Investments has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, WisdomTree Investments is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Deckers Outdoor

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Deckers Outdoor are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Deckers Outdoor reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with WisdomTree Investments and Deckers Outdoor

The main advantage of trading using opposite WisdomTree Investments and Deckers Outdoor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WisdomTree Investments position performs unexpectedly, Deckers Outdoor 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 Deckers Outdoor will offset losses from the drop in Deckers Outdoor's long position.

The idea behind WisdomTree Investments and Deckers Outdoor 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.