Correlation Between Good Life and Skechers USA

Can any of the company-specific risk be diversified away by investing in both Good Life and Skechers USA 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 Good Life and Skechers USA into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Good Life China and Skechers USA, you can compare the effects of market volatilities on Good Life and Skechers USA 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 Good Life with a short position of Skechers USA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Good Life and Skechers USA.

Diversification Opportunities for Good Life and Skechers USA

0.0

Correlation Coefficient

Good Life  Skechers USA

Pay attention - limited upside

The 3 months correlation between Good and Skechers is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Good Life China and Skechers USA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Skechers USA and Good Life 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 Good Life China are associated (or correlated) with Skechers USA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Skechers USA has no effect on the direction of Good Life i.e., Good Life and Skechers USA go up and down completely randomly.

Pair Corralation between Good Life and Skechers USA

Given the investment horizon of 90 days Good Life China is expected to generate 23.4 times more return on investment than Skechers USA. However, Good Life is 23.4 times more volatile than Skechers USA. It trades about 0.04 of its potential returns per unit of risk. Skechers USA is currently generating about 0.07 per unit of risk. If you would invest  0.01  in Good Life China on October 26, 2024 and sell it today you would earn a total of  2,907  from holding Good Life China or generate 2.90699E7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	99.2%
Values	Daily Returns

Good Life China  vs.  Skechers USA

Good Life China

Risk-Adjusted Performance

9 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Good Life China are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain fundamental indicators, Good Life exhibited solid returns over the last few months and may actually be approaching a breakup point.

Skechers USA

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Skechers USA are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak forward-looking signals, Skechers USA showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Good Life and Skechers USA

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

The idea behind Good Life China and Skechers USA 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.

Check out your portfolio center.

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 Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.