Correlation Between Steven Madden and Birkenstock Holding

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

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

Diversification Opportunities for Steven Madden and Birkenstock Holding

0.53

Correlation Coefficient

Steven Madden  Birkenstock Holding

Very weak diversification

The 3 months correlation between Steven and Birkenstock is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Steven Madden and Birkenstock Holding plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Birkenstock Holding plc and Steven Madden 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 Steven Madden are associated (or correlated) with Birkenstock Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Birkenstock Holding plc has no effect on the direction of Steven Madden i.e., Steven Madden and Birkenstock Holding go up and down completely randomly.

Pair Corralation between Steven Madden and Birkenstock Holding

Given the investment horizon of 90 days Steven Madden is expected to generate 0.65 times more return on investment than Birkenstock Holding. However, Steven Madden is 1.54 times less risky than Birkenstock Holding. It trades about 0.05 of its potential returns per unit of risk. Birkenstock Holding plc is currently generating about 0.02 per unit of risk. If you would invest  3,928  in Steven Madden on September 4, 2024 and sell it today you would earn a total of  673.00  from holding Steven Madden or generate 17.13% return on investment over 90 days.

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

Steven Madden  vs.  Birkenstock Holding plc

Steven Madden

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Steven Madden are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Steven Madden is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Birkenstock Holding plc

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Birkenstock Holding plc are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating basic indicators, Birkenstock Holding may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Steven Madden and Birkenstock Holding

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

The idea behind Steven Madden and Birkenstock Holding 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 Transaction History module to view history of all your transactions and understand their impact on performance.