Correlation Between Rocky Brands and Deckers Outdoor

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

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

Diversification Opportunities for Rocky Brands and Deckers Outdoor

-0.72

Correlation Coefficient

Rocky Brands  Deckers Outdoor

Pay attention - limited upside

The 3 months correlation between Rocky and Deckers is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Rocky Brands and Deckers Outdoor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deckers Outdoor and Rocky Brands 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 Rocky Brands 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 Rocky Brands i.e., Rocky Brands and Deckers Outdoor go up and down completely randomly.

Pair Corralation between Rocky Brands and Deckers Outdoor

Given the investment horizon of 90 days Rocky Brands is expected to under-perform the Deckers Outdoor. In addition to that, Rocky Brands is 1.64 times more volatile than Deckers Outdoor. It trades about -0.11 of its total potential returns per unit of risk. Deckers Outdoor is currently generating about 0.19 per unit of volatility. If you would invest  14,984  in Deckers Outdoor on September 1, 2024 and sell it today you would earn a total of  4,612  from holding Deckers Outdoor or generate 30.78% return on investment over 90 days.

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

Rocky Brands  vs.  Deckers Outdoor

Rocky Brands

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rocky Brands has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's forward-looking signals remain fairly strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Deckers Outdoor

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Deckers Outdoor are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating fundamental indicators, Deckers Outdoor disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Rocky Brands and Deckers Outdoor

The main advantage of trading using opposite Rocky Brands and Deckers Outdoor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rocky Brands 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 Rocky Brands 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.