Correlation Between Cavco Industries and Steven Madden

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

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

Diversification Opportunities for Cavco Industries and Steven Madden

-0.03

Correlation Coefficient

Cavco Industries  Steven Madden

Good diversification

The 3 months correlation between Cavco and Steven is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Cavco Industries and Steven Madden in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Steven Madden and Cavco Industries 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 Cavco Industries are associated (or correlated) with Steven Madden. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Steven Madden has no effect on the direction of Cavco Industries i.e., Cavco Industries and Steven Madden go up and down completely randomly.

Pair Corralation between Cavco Industries and Steven Madden

Given the investment horizon of 90 days Cavco Industries is expected to generate 1.33 times more return on investment than Steven Madden. However, Cavco Industries is 1.33 times more volatile than Steven Madden. It trades about 0.06 of its potential returns per unit of risk. Steven Madden is currently generating about 0.03 per unit of risk. If you would invest  27,530  in Cavco Industries on October 23, 2024 and sell it today you would earn a total of  20,154  from holding Cavco Industries or generate 73.21% return on investment over 90 days.

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

Cavco Industries  vs.  Steven Madden

Cavco Industries

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cavco Industries are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent fundamental indicators, Cavco Industries displayed solid returns over the last few months and may actually be approaching a breakup point.

Steven Madden

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Steven Madden has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Cavco Industries and Steven Madden

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

The idea behind Cavco Industries and Steven Madden 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.