Correlation Between Escalade Incorporated and Steven Madden

Can any of the company-specific risk be diversified away by investing in both Escalade Incorporated and Steven Madden 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 Escalade Incorporated and Steven Madden into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Escalade Incorporated and Steven Madden, you can compare the effects of market volatilities on Escalade Incorporated and Steven Madden 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 Escalade Incorporated with a short position of Steven Madden. Check out your portfolio center. Please also check ongoing floating volatility patterns of Escalade Incorporated and Steven Madden.

Diversification Opportunities for Escalade Incorporated and Steven Madden

-0.42

Correlation Coefficient

Escalade Incorporated  Steven Madden

Very good diversification

The 3 months correlation between Escalade and Steven is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Escalade Incorporated and Steven Madden in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Steven Madden and Escalade Incorporated 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 Escalade Incorporated are associated (or correlated) with Steven Madden. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Steven Madden has no effect on the direction of Escalade Incorporated i.e., Escalade Incorporated and Steven Madden go up and down completely randomly.

Pair Corralation between Escalade Incorporated and Steven Madden

Given the investment horizon of 90 days Escalade Incorporated is expected to under-perform the Steven Madden. In addition to that, Escalade Incorporated is 3.7 times more volatile than Steven Madden. It trades about -0.15 of its total potential returns per unit of risk. Steven Madden is currently generating about -0.23 per unit of volatility. If you would invest  4,363  in Steven Madden on October 9, 2024 and sell it today you would lose (148.00) from holding Steven Madden or give up 3.39% of portfolio value over 90 days.

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

Escalade Incorporated  vs.  Steven Madden

Escalade Incorporated

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Escalade Incorporated are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain fundamental indicators, Escalade Incorporated sustained solid returns over the last few months and may actually be approaching a breakup point.

Steven Madden

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Steven Madden has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Escalade Incorporated and Steven Madden

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

The idea behind Escalade Incorporated and Steven Madden 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.