Correlation Between Deckers Outdoor and Vera Bradley

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

By analyzing existing cross correlation between Deckers Outdoor and Vera Bradley, you can compare the effects of market volatilities on Deckers Outdoor and Vera Bradley 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 Vera Bradley. Check out your portfolio center. Please also check ongoing floating volatility patterns of Deckers Outdoor and Vera Bradley.

Diversification Opportunities for Deckers Outdoor and Vera Bradley

0.89

Correlation Coefficient

Deckers Outdoor  Vera Bradley

Very poor diversification

The 3 months correlation between Deckers and Vera is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Deckers Outdoor and Vera Bradley in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vera Bradley 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 Vera Bradley. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vera Bradley has no effect on the direction of Deckers Outdoor i.e., Deckers Outdoor and Vera Bradley go up and down completely randomly.

Pair Corralation between Deckers Outdoor and Vera Bradley

Given the investment horizon of 90 days Deckers Outdoor is expected to under-perform the Vera Bradley. But the stock apears to be less risky and, when comparing its historical volatility, Deckers Outdoor is 1.23 times less risky than Vera Bradley. The stock trades about -0.25 of its potential returns per unit of risk. The Vera Bradley is currently generating about -0.2 of returns per unit of risk over similar time horizon. If you would invest  391.00  in Vera Bradley on December 28, 2024 and sell it today you would lose (166.00) from holding Vera Bradley or give up 42.46% of portfolio value over 90 days.

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

Deckers Outdoor  vs.  Vera Bradley

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.

Vera Bradley

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vera Bradley has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain somewhat 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 Vera Bradley

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

The idea behind Deckers Outdoor and Vera Bradley 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.