Correlation Between Steven Madden and Deckers Outdoor

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

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

Diversification Opportunities for Steven Madden and Deckers Outdoor

-0.28

Correlation Coefficient

Steven Madden  Deckers Outdoor

Very good diversification

The 3 months correlation between Steven and Deckers is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Steven Madden and Deckers Outdoor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deckers Outdoor 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 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 Steven Madden i.e., Steven Madden and Deckers Outdoor go up and down completely randomly.

Pair Corralation between Steven Madden and Deckers Outdoor

Given the investment horizon of 90 days Steven Madden is expected to generate 23.28 times less return on investment than Deckers Outdoor. But when comparing it to its historical volatility, Steven Madden is 1.46 times less risky than Deckers Outdoor. It trades about 0.01 of its potential returns per unit of risk. Deckers Outdoor is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  15,988  in Deckers Outdoor on August 30, 2024 and sell it today you would earn a total of  3,189  from holding Deckers Outdoor or generate 19.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Steven Madden  vs.  Deckers Outdoor

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 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.

Deckers Outdoor

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Deckers Outdoor are ranked lower than 9 (%) 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 Steven Madden and Deckers Outdoor

The main advantage of trading using opposite Steven Madden and Deckers Outdoor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Steven Madden 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 Steven Madden 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.