Correlation Between Zumiez and Skechers USA

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

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

Diversification Opportunities for Zumiez and Skechers USA

-0.15

Correlation Coefficient

Zumiez  Skechers USA

Good diversification

The 3 months correlation between Zumiez and Skechers is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Zumiez Inc and Skechers USA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Skechers USA and Zumiez 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 Zumiez Inc 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 Zumiez i.e., Zumiez and Skechers USA go up and down completely randomly.

Pair Corralation between Zumiez and Skechers USA

Given the investment horizon of 90 days Zumiez Inc is expected to under-perform the Skechers USA. In addition to that, Zumiez is 1.58 times more volatile than Skechers USA. It trades about -0.05 of its total potential returns per unit of risk. Skechers USA is currently generating about 0.06 per unit of volatility. If you would invest  6,310  in Skechers USA on September 21, 2024 and sell it today you would earn a total of  455.00  from holding Skechers USA or generate 7.21% return on investment over 90 days.

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

Zumiez Inc  vs.  Skechers USA

Zumiez Inc

Risk-Adjusted Performance

0 of 100

Very Weak

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

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 Zumiez and Skechers USA

The main advantage of trading using opposite Zumiez and Skechers USA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Zumiez 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 Zumiez Inc 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.