Correlation Between Deckers Outdoor and Air T

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

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

Diversification Opportunities for Deckers Outdoor and Air T

-0.47

Correlation Coefficient

Deckers Outdoor  Air T

Very good diversification

The 3 months correlation between Deckers and Air is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Deckers Outdoor and Air T Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air T Inc and Deckers Outdoor 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 Deckers Outdoor are associated (or correlated) with Air T. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air T Inc has no effect on the direction of Deckers Outdoor i.e., Deckers Outdoor and Air T go up and down completely randomly.

Pair Corralation between Deckers Outdoor and Air T

Given the investment horizon of 90 days Deckers Outdoor is expected to generate 0.62 times more return on investment than Air T. However, Deckers Outdoor is 1.63 times less risky than Air T. It trades about 0.1 of its potential returns per unit of risk. Air T Inc is currently generating about 0.0 per unit of risk. If you would invest  8,764  in Deckers Outdoor on August 1, 2024 and sell it today you would earn a total of  8,191  from holding Deckers Outdoor or generate 93.46% return on investment over 90 days.

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

Deckers Outdoor  vs.  Air T Inc

Deckers Outdoor

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Deckers Outdoor are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite weak fundamental indicators, Deckers Outdoor disclosed solid returns over the last few months and may actually be approaching a breakup point.

Air T Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Air T Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in November 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Deckers Outdoor and Air T

The main advantage of trading using opposite Deckers Outdoor and Air T positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Deckers Outdoor position performs unexpectedly, Air T 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 Air T will offset losses from the drop in Air T's long position.

The idea behind Deckers Outdoor and Air T Inc 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.