Correlation Between Deckers Outdoor and Wolverine World

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

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

Diversification Opportunities for Deckers Outdoor and Wolverine World

0.89

Correlation Coefficient

Deckers Outdoor  Wolverine World

Very poor diversification

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

Pair Corralation between Deckers Outdoor and Wolverine World

Given the investment horizon of 90 days Deckers Outdoor is expected to generate 0.59 times more return on investment than Wolverine World. However, Deckers Outdoor is 1.68 times less risky than Wolverine World. It trades about 0.11 of its potential returns per unit of risk. Wolverine World Wide is currently generating about 0.06 per unit of risk. If you would invest  6,764  in Deckers Outdoor on August 31, 2024 and sell it today you would earn a total of  12,832  from holding Deckers Outdoor or generate 189.71% return on investment over 90 days.

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

Deckers Outdoor  vs.  Wolverine World Wide

Deckers Outdoor

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Deckers Outdoor are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating fundamental indicators, Deckers Outdoor disclosed solid returns over the last few months and may actually be approaching a breakup point.

Wolverine World Wide

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Wolverine World Wide are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Wolverine World showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Deckers Outdoor and Wolverine World

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

The idea behind Deckers Outdoor and Wolverine World Wide 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.