Correlation Between Skechers USA and Virco Manufacturing

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

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

Diversification Opportunities for Skechers USA and Virco Manufacturing

-0.14

Correlation Coefficient

Skechers USA  Virco Manufacturing

Good diversification

The 3 months correlation between Skechers and Virco is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Skechers USA and Virco Manufacturing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Virco Manufacturing 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 Virco Manufacturing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Virco Manufacturing has no effect on the direction of Skechers USA i.e., Skechers USA and Virco Manufacturing go up and down completely randomly.

Pair Corralation between Skechers USA and Virco Manufacturing

Considering the 90-day investment horizon Skechers USA is expected to generate 1.67 times less return on investment than Virco Manufacturing. But when comparing it to its historical volatility, Skechers USA is 1.43 times less risky than Virco Manufacturing. It trades about 0.06 of its potential returns per unit of risk. Virco Manufacturing is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1,446  in Virco Manufacturing on September 6, 2024 and sell it today you would earn a total of  162.00  from holding Virco Manufacturing or generate 11.2% return on investment over 90 days.

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

Skechers USA  vs.  Virco Manufacturing

Skechers USA

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Skechers USA are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak forward-looking signals, Skechers USA may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Virco Manufacturing

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Virco Manufacturing are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, Virco Manufacturing exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Skechers USA and Virco Manufacturing

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

The idea behind Skechers USA and Virco Manufacturing 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.