Correlation Between Weibo Corp and Skechers USA

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

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

Diversification Opportunities for Weibo Corp and Skechers USA

0.61

Correlation Coefficient

Weibo Corp  Skechers USA

Poor diversification

The 3 months correlation between Weibo and Skechers is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Weibo Corp and Skechers USA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Skechers USA and Weibo Corp 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 Weibo Corp are associated (or correlated) with Skechers USA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Skechers USA has no effect on the direction of Weibo Corp i.e., Weibo Corp and Skechers USA go up and down completely randomly.

Pair Corralation between Weibo Corp and Skechers USA

Allowing for the 90-day total investment horizon Weibo Corp is expected to generate 1.84 times less return on investment than Skechers USA. In addition to that, Weibo Corp is 1.43 times more volatile than Skechers USA. It trades about 0.11 of its total potential returns per unit of risk. Skechers USA is currently generating about 0.29 per unit of volatility. If you would invest  5,977  in Skechers USA on September 21, 2024 and sell it today you would earn a total of  788.00  from holding Skechers USA or generate 13.18% return on investment over 90 days.

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

Weibo Corp  vs.  Skechers USA

Weibo Corp

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Weibo Corp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating fundamental drivers, Weibo Corp sustained solid returns over the last few months and may actually be approaching a breakup point.

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 inconsistent forward-looking signals, Skechers USA may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Weibo Corp and Skechers USA

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

The idea behind Weibo Corp and Skechers USA 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.