Correlation Between American Public and Deckers Outdoor

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

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

Diversification Opportunities for American Public and Deckers Outdoor

0.96

Correlation Coefficient

American Public  Deckers Outdoor

Almost no diversification

The 3 months correlation between American and Deckers is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding American Public Education and Deckers Outdoor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deckers Outdoor and American Public 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 American Public Education 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 American Public i.e., American Public and Deckers Outdoor go up and down completely randomly.

Pair Corralation between American Public and Deckers Outdoor

Assuming the 90 days horizon American Public Education is expected to generate 1.6 times more return on investment than Deckers Outdoor. However, American Public is 1.6 times more volatile than Deckers Outdoor. It trades about 0.13 of its potential returns per unit of risk. Deckers Outdoor is currently generating about 0.11 per unit of risk. If you would invest  444.00  in American Public Education on September 26, 2024 and sell it today you would earn a total of  1,546  from holding American Public Education or generate 348.2% return on investment over 90 days.

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

American Public Education  vs.  Deckers Outdoor

American Public Education

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in American Public Education are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, American Public reported solid returns over the last few months and may actually be approaching a breakup point.

Deckers Outdoor

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Deckers Outdoor are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Deckers Outdoor reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with American Public and Deckers Outdoor

The main advantage of trading using opposite American Public and Deckers Outdoor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Public 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 American Public Education 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.