Correlation Between ASICS and Crocs

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

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

Diversification Opportunities for ASICS and Crocs

-0.32

Correlation Coefficient

ASICS  Crocs

Very good diversification

The 3 months correlation between ASICS and Crocs is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding ASICS and Crocs Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Crocs Inc and ASICS 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 ASICS are associated (or correlated) with Crocs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Crocs Inc has no effect on the direction of ASICS i.e., ASICS and Crocs go up and down completely randomly.

Pair Corralation between ASICS and Crocs

Assuming the 90 days horizon ASICS is expected to generate 1.81 times more return on investment than Crocs. However, ASICS is 1.81 times more volatile than Crocs Inc. It trades about 0.04 of its potential returns per unit of risk. Crocs Inc is currently generating about -0.02 per unit of risk. If you would invest  1,946  in ASICS on December 1, 2024 and sell it today you would earn a total of  26.00  from holding ASICS or generate 1.34% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	66.67%
Values	Daily Returns

ASICS  vs.  Crocs Inc

ASICS

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ASICS are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal fundamental indicators, ASICS reported solid returns over the last few months and may actually be approaching a breakup point.

Crocs Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Crocs Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Crocs is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with ASICS and Crocs

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

The idea behind ASICS and Crocs Inc 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.