Correlation Between Liquidity Services and Deckers Outdoor

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

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

Diversification Opportunities for Liquidity Services and Deckers Outdoor

0.47

Correlation Coefficient

Liquidity Services  Deckers Outdoor

Very weak diversification

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

Pair Corralation between Liquidity Services and Deckers Outdoor

Given the investment horizon of 90 days Liquidity Services is expected to under-perform the Deckers Outdoor. But the stock apears to be less risky and, when comparing its historical volatility, Liquidity Services is 1.41 times less risky than Deckers Outdoor. The stock trades about -0.14 of its potential returns per unit of risk. The Deckers Outdoor is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  12,086  in Deckers Outdoor on May 7, 2025 and sell it today you would lose (1,573) from holding Deckers Outdoor or give up 13.02% of portfolio value over 90 days.

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

Liquidity Services  vs.  Deckers Outdoor

Liquidity Services

Risk-Adjusted Performance

Weakest

Over the last 90 days Liquidity Services 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 fundamental indicators remain comparatively stable which may send shares a bit higher in September 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Deckers Outdoor

Risk-Adjusted Performance

Weakest

Over the last 90 days Deckers Outdoor has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's fundamental indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Liquidity Services and Deckers Outdoor

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

The idea behind Liquidity Services and Deckers Outdoor 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.