Correlation Between Crocs and Continental

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

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

Diversification Opportunities for Crocs and Continental

0.49

Correlation Coefficient

Crocs  Continental

Very weak diversification

The 3 months correlation between Crocs and Continental is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Crocs Inc and Caleres in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Continental and Crocs 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 Crocs Inc are associated (or correlated) with Continental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Continental has no effect on the direction of Crocs i.e., Crocs and Continental go up and down completely randomly.

Pair Corralation between Crocs and Continental

Given the investment horizon of 90 days Crocs Inc is expected to under-perform the Continental. But the stock apears to be less risky and, when comparing its historical volatility, Crocs Inc is 1.07 times less risky than Continental. The stock trades about -0.12 of its potential returns per unit of risk. The Caleres is currently generating about -0.1 of returns per unit of risk over similar time horizon. If you would invest  3,984  in Caleres on September 3, 2024 and sell it today you would lose (877.00) from holding Caleres or give up 22.01% of portfolio value over 90 days.

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

Crocs Inc  vs.  Caleres

Crocs Inc

Risk-Adjusted Performance

0 of 100

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 unfluctuating performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

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 weak 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.

Pair Trading with Crocs and Continental

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

The idea behind Crocs Inc and Caleres 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.