Correlation Between Steven Madden and Four Seasons

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

By analyzing existing cross correlation between Steven Madden and Four Seasons Education, you can compare the effects of market volatilities on Steven Madden and Four Seasons 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 Four Seasons. Check out your portfolio center. Please also check ongoing floating volatility patterns of Steven Madden and Four Seasons.

Diversification Opportunities for Steven Madden and Four Seasons

0.15

Correlation Coefficient

Steven Madden  Four Seasons

Average diversification

The 3 months correlation between Steven and Four is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Steven Madden and Four Seasons Education in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Four Seasons Education 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 Four Seasons. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Four Seasons Education has no effect on the direction of Steven Madden i.e., Steven Madden and Four Seasons go up and down completely randomly.

Pair Corralation between Steven Madden and Four Seasons

Given the investment horizon of 90 days Steven Madden is expected to generate 31.94 times less return on investment than Four Seasons. But when comparing it to its historical volatility, Steven Madden is 28.16 times less risky than Four Seasons. It trades about 0.05 of its potential returns per unit of risk. Four Seasons Education is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  558.00  in Four Seasons Education on September 15, 2024 and sell it today you would earn a total of  572.00  from holding Four Seasons Education or generate 102.51% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	83.03%
Values	Daily Returns

Steven Madden  vs.  Four Seasons Education

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.

Four Seasons Education

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Four Seasons Education are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak fundamental indicators, Four Seasons unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Steven Madden and Four Seasons

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

The idea behind Steven Madden and Four Seasons Education 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.