Correlation Between Dr Martens and Good Vibrations

Can any of the company-specific risk be diversified away by investing in both Dr Martens and Good Vibrations 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 Good Vibrations 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 Good Vibrations Shoes, you can compare the effects of market volatilities on Dr Martens and Good Vibrations 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 Good Vibrations. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dr Martens and Good Vibrations.

Diversification Opportunities for Dr Martens and Good Vibrations

0.44

Correlation Coefficient

Dr Martens  Good Vibrations

Very weak diversification

The 3 months correlation between DOCMF and Good is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Dr Martens plc and Good Vibrations Shoes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Good Vibrations Shoes 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 Good Vibrations. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Good Vibrations Shoes has no effect on the direction of Dr Martens i.e., Dr Martens and Good Vibrations go up and down completely randomly.

Pair Corralation between Dr Martens and Good Vibrations

Assuming the 90 days horizon Dr Martens plc is expected to under-perform the Good Vibrations. But the pink sheet apears to be less risky and, when comparing its historical volatility, Dr Martens plc is 3.31 times less risky than Good Vibrations. The pink sheet trades about -0.11 of its potential returns per unit of risk. The Good Vibrations Shoes is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  0.35  in Good Vibrations Shoes on December 28, 2024 and sell it today you would lose (0.02) from holding Good Vibrations Shoes or give up 5.71% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.36%
Values	Daily Returns

Dr Martens plc  vs.  Good Vibrations Shoes

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 weak performance in the last few months, the Stock's primary indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Good Vibrations Shoes

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Good Vibrations Shoes are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly abnormal basic indicators, Good Vibrations demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dr Martens and Good Vibrations

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

The idea behind Dr Martens plc and Good Vibrations Shoes 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.