Correlation Between Good Vibrations and Dr Martens

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

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

Diversification Opportunities for Good Vibrations and Dr Martens

0.31

Correlation Coefficient

Good Vibrations  Dr Martens

Weak diversification

The 3 months correlation between Good and DOCMF is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Good Vibrations Shoes and Dr Martens plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dr Martens plc and Good Vibrations 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 Vibrations Shoes are associated (or correlated) with Dr Martens. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dr Martens plc has no effect on the direction of Good Vibrations i.e., Good Vibrations and Dr Martens go up and down completely randomly.

Pair Corralation between Good Vibrations and Dr Martens

Given the investment horizon of 90 days Good Vibrations Shoes is expected to generate 4.07 times more return on investment than Dr Martens. However, Good Vibrations is 4.07 times more volatile than Dr Martens plc. It trades about 0.11 of its potential returns per unit of risk. Dr Martens plc is currently generating about 0.0 per unit of risk. If you would invest  0.23  in Good Vibrations Shoes on November 29, 2024 and sell it today you would earn a total of  0.12  from holding Good Vibrations Shoes or generate 52.17% return on investment over 90 days.

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

Good Vibrations Shoes  vs.  Dr Martens plc

Good Vibrations Shoes

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Good Vibrations Shoes are ranked lower than 8 (%) 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.

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.

Pair Trading with Good Vibrations and Dr Martens

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

The idea behind Good Vibrations Shoes and Dr Martens plc 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 Global Correlations module to find global opportunities by holding instruments from different markets.