Correlation Between Deckers Outdoor and PUMA SE

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

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

Diversification Opportunities for Deckers Outdoor and PUMA SE

0.8

Correlation Coefficient

Deckers Outdoor  PUMA SE

Very poor diversification

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

Pair Corralation between Deckers Outdoor and PUMA SE

Assuming the 90 days horizon Deckers Outdoor is expected to generate 1.23 times more return on investment than PUMA SE. However, Deckers Outdoor is 1.23 times more volatile than PUMA SE. It trades about 0.19 of its potential returns per unit of risk. PUMA SE is currently generating about 0.14 per unit of risk. If you would invest  14,043  in Deckers Outdoor on September 16, 2024 and sell it today you would earn a total of  5,407  from holding Deckers Outdoor or generate 38.5% 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.  PUMA SE

Deckers Outdoor

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Deckers Outdoor are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Deckers Outdoor reported solid returns over the last few months and may actually be approaching a breakup point.

PUMA SE

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PUMA SE are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, PUMA SE reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Deckers Outdoor and PUMA SE

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

The idea behind Deckers Outdoor and PUMA SE 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.