Correlation Between Deckers Outdoor and Boohoo PLC

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

By analyzing existing cross correlation between Deckers Outdoor and BoohooCom PLC ADR, you can compare the effects of market volatilities on Deckers Outdoor and Boohoo PLC 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 Deckers Outdoor with a short position of Boohoo PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Deckers Outdoor and Boohoo PLC.

Diversification Opportunities for Deckers Outdoor and Boohoo PLC

0.8

Correlation Coefficient

Deckers Outdoor  Boohoo PLC

Very poor diversification

The 3 months correlation between Deckers and Boohoo is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Deckers Outdoor and BoohooCom PLC ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BoohooCom PLC ADR and Deckers Outdoor 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 Deckers Outdoor are associated (or correlated) with Boohoo PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BoohooCom PLC ADR has no effect on the direction of Deckers Outdoor i.e., Deckers Outdoor and Boohoo PLC go up and down completely randomly.

Pair Corralation between Deckers Outdoor and Boohoo PLC

Given the investment horizon of 90 days Deckers Outdoor is expected to under-perform the Boohoo PLC. In addition to that, Deckers Outdoor is 1.06 times more volatile than BoohooCom PLC ADR. It trades about -0.27 of its total potential returns per unit of risk. BoohooCom PLC ADR is currently generating about -0.13 per unit of volatility. If you would invest  933.00  in BoohooCom PLC ADR on December 30, 2024 and sell it today you would lose (239.00) from holding BoohooCom PLC ADR or give up 25.62% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	96.88%
Values	Daily Returns

Deckers Outdoor  vs.  BoohooCom PLC ADR

Deckers Outdoor

Risk-Adjusted Performance

Very Weak

Over the last 90 days Deckers Outdoor 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 fundamental indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

BoohooCom PLC ADR

Risk-Adjusted Performance

Very Weak

Over the last 90 days BoohooCom PLC ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Deckers Outdoor and Boohoo PLC

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

The idea behind Deckers Outdoor and BoohooCom PLC ADR 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.