Correlation Between Continental and Skechers USA

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

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

Diversification Opportunities for Continental and Skechers USA

-0.32

Correlation Coefficient

Continental  Skechers USA

Very good diversification

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

Pair Corralation between Continental and Skechers USA

Considering the 90-day investment horizon Caleres is expected to under-perform the Skechers USA. In addition to that, Continental is 2.1 times more volatile than Skechers USA. It trades about -0.1 of its total potential returns per unit of risk. Skechers USA is currently generating about 0.12 per unit of volatility. If you would invest  6,167  in Skechers USA on September 23, 2024 and sell it today you would earn a total of  598.00  from holding Skechers USA or generate 9.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Caleres  vs.  Skechers USA

Continental

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Caleres has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Skechers USA

Risk-Adjusted Performance

4 of 100

Insignificant

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

Pair Trading with Continental and Skechers USA

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

The idea behind Caleres and Skechers USA 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.

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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.