Correlation Between Cracker Barrel and Skechers USA

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Can any of the company-specific risk be diversified away by investing in both Cracker Barrel 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 Cracker Barrel and Skechers USA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cracker Barrel Old and Skechers USA, you can compare the effects of market volatilities on Cracker Barrel 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 Cracker Barrel with a short position of Skechers USA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cracker Barrel and Skechers USA.

Diversification Opportunities for Cracker Barrel and Skechers USA

0.38
  Correlation Coefficient

Weak diversification

The 3 months correlation between Cracker and Skechers is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Cracker Barrel Old and Skechers USA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Skechers USA and Cracker Barrel 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 Cracker Barrel Old 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 Cracker Barrel i.e., Cracker Barrel and Skechers USA go up and down completely randomly.

Pair Corralation between Cracker Barrel and Skechers USA

Given the investment horizon of 90 days Cracker Barrel Old is expected to under-perform the Skechers USA. In addition to that, Cracker Barrel is 1.42 times more volatile than Skechers USA. It trades about -0.04 of its total potential returns per unit of risk. Skechers USA is currently generating about 0.06 per unit of volatility. If you would invest  4,322  in Skechers USA on October 5, 2024 and sell it today you would earn a total of  2,407  from holding Skechers USA or generate 55.69% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Cracker Barrel Old  vs.  Skechers USA

 Performance 
       Timeline  
Cracker Barrel Old 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Cracker Barrel Old are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain basic indicators, Cracker Barrel disclosed solid returns over the last few months and may actually be approaching a breakup point.
Skechers USA 

Risk-Adjusted Performance

1 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Skechers USA are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong forward-looking signals, Skechers USA is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Cracker Barrel and Skechers USA Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Cracker Barrel and Skechers USA

The main advantage of trading using opposite Cracker Barrel and Skechers USA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cracker Barrel 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 Cracker Barrel Old 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.
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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.

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