Correlation Between Skechers USA and PVH Corp

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

By analyzing existing cross correlation between Skechers USA and PVH Corp, you can compare the effects of market volatilities on Skechers USA and PVH Corp 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 PVH Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Skechers USA and PVH Corp.

Diversification Opportunities for Skechers USA and PVH Corp

0.06

Correlation Coefficient

Skechers USA  PVH Corp

Significant diversification

The 3 months correlation between Skechers and PVH is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Skechers USA and PVH Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PVH Corp 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 PVH Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PVH Corp has no effect on the direction of Skechers USA i.e., Skechers USA and PVH Corp go up and down completely randomly.

Pair Corralation between Skechers USA and PVH Corp

Considering the 90-day investment horizon Skechers USA is expected to under-perform the PVH Corp. In addition to that, Skechers USA is 1.69 times more volatile than PVH Corp. It trades about -0.2 of its total potential returns per unit of risk. PVH Corp is currently generating about -0.31 per unit of volatility. If you would invest  9,039  in PVH Corp on November 28, 2024 and sell it today you would lose (1,209) from holding PVH Corp or give up 13.38% of portfolio value over 90 days.

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

Skechers USA  vs.  PVH Corp

Skechers USA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Skechers USA has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

PVH Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days PVH Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in March 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Skechers USA and PVH Corp

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

The idea behind Skechers USA and PVH Corp 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.