Correlation Between Skechers USA and RLX Technology

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

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

Diversification Opportunities for Skechers USA and RLX Technology

-0.07

Correlation Coefficient

Skechers USA  RLX Technology

Good diversification

The 3 months correlation between Skechers and RLX is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Skechers USA and RLX Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RLX Technology 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 RLX Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RLX Technology has no effect on the direction of Skechers USA i.e., Skechers USA and RLX Technology go up and down completely randomly.

Pair Corralation between Skechers USA and RLX Technology

Considering the 90-day investment horizon Skechers USA is expected to under-perform the RLX Technology. But the stock apears to be less risky and, when comparing its historical volatility, Skechers USA is 1.21 times less risky than RLX Technology. The stock trades about -0.08 of its potential returns per unit of risk. The RLX Technology is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  218.00  in RLX Technology on December 28, 2024 and sell it today you would lose (27.00) from holding RLX Technology or give up 12.39% of portfolio value over 90 days.

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

Skechers USA  vs.  RLX Technology

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 weak performance in the last few months, the Stock's forward-looking signals remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

RLX Technology

Risk-Adjusted Performance

Very Weak

Over the last 90 days RLX Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's essential indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Skechers USA and RLX Technology

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

The idea behind Skechers USA and RLX Technology 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.