Correlation Between Dr Martens and Deckers Outdoor

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

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

Diversification Opportunities for Dr Martens and Deckers Outdoor

0.27

Correlation Coefficient

Dr Martens  Deckers Outdoor

Modest diversification

The 3 months correlation between DOCMF and Deckers is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Dr Martens plc and Deckers Outdoor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deckers Outdoor and Dr Martens 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 Dr Martens plc are associated (or correlated) with Deckers Outdoor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Deckers Outdoor has no effect on the direction of Dr Martens i.e., Dr Martens and Deckers Outdoor go up and down completely randomly.

Pair Corralation between Dr Martens and Deckers Outdoor

Assuming the 90 days horizon Dr Martens plc is expected to generate 0.87 times more return on investment than Deckers Outdoor. However, Dr Martens plc is 1.15 times less risky than Deckers Outdoor. It trades about 0.0 of its potential returns per unit of risk. Deckers Outdoor is currently generating about -0.15 per unit of risk. If you would invest  87.00  in Dr Martens plc on November 29, 2024 and sell it today you would lose (2.00) from holding Dr Martens plc or give up 2.3% of portfolio value over 90 days.

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

Dr Martens plc  vs.  Deckers Outdoor

Dr Martens plc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dr Martens plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable primary indicators, Dr Martens is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

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 March 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Dr Martens and Deckers Outdoor

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

The idea behind Dr Martens plc and Deckers Outdoor 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..