Correlation Between Skechers USA and Interactive Brokers

Can any of the company-specific risk be diversified away by investing in both Skechers USA and Interactive Brokers 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 Skechers USA and Interactive Brokers into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Skechers USA and Interactive Brokers Group, you can compare the effects of market volatilities on Skechers USA and Interactive Brokers 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 Skechers USA with a short position of Interactive Brokers. Check out your portfolio center. Please also check ongoing floating volatility patterns of Skechers USA and Interactive Brokers.

Diversification Opportunities for Skechers USA and Interactive Brokers

0.23

Correlation Coefficient

Skechers USA  Interactive Brokers

Modest diversification

The 3 months correlation between Skechers and Interactive is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Skechers USA and Interactive Brokers Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Interactive Brokers and Skechers USA 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 Skechers USA are associated (or correlated) with Interactive Brokers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Interactive Brokers has no effect on the direction of Skechers USA i.e., Skechers USA and Interactive Brokers go up and down completely randomly.

Pair Corralation between Skechers USA and Interactive Brokers

Considering the 90-day investment horizon Skechers USA is expected to under-perform the Interactive Brokers. But the stock apears to be less risky and, when comparing its historical volatility, Skechers USA is 1.14 times less risky than Interactive Brokers. The stock trades about -0.09 of its potential returns per unit of risk. The Interactive Brokers Group is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  18,696  in Interactive Brokers Group on October 7, 2024 and sell it today you would lose (324.00) from holding Interactive Brokers Group or give up 1.73% of portfolio value over 90 days.

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

Skechers USA  vs.  Interactive Brokers Group

Skechers USA

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Skechers USA are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong forward-looking signals, Skechers USA is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Interactive Brokers

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Interactive Brokers Group are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent forward-looking signals, Interactive Brokers reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Skechers USA and Interactive Brokers

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

The idea behind Skechers USA and Interactive Brokers Group 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.