Correlation Between Crocs and Escalade Incorporated

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

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

Diversification Opportunities for Crocs and Escalade Incorporated

-0.67

Correlation Coefficient

Crocs  Escalade Incorporated

Excellent diversification

The 3 months correlation between Crocs and Escalade is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Crocs Inc and Escalade Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Escalade Incorporated and Crocs 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 Crocs Inc are associated (or correlated) with Escalade Incorporated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Escalade Incorporated has no effect on the direction of Crocs i.e., Crocs and Escalade Incorporated go up and down completely randomly.

Pair Corralation between Crocs and Escalade Incorporated

Given the investment horizon of 90 days Crocs is expected to generate 1.67 times less return on investment than Escalade Incorporated. In addition to that, Crocs is 1.09 times more volatile than Escalade Incorporated. It trades about 0.02 of its total potential returns per unit of risk. Escalade Incorporated is currently generating about 0.04 per unit of volatility. If you would invest  1,119  in Escalade Incorporated on February 7, 2024 and sell it today you would earn a total of  210.00  from holding Escalade Incorporated or generate 18.77% return on investment over 90 days.

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

Crocs Inc  vs.  Escalade Incorporated

Crocs Inc

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Crocs Inc are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Crocs showed solid returns over the last few months and may actually be approaching a breakup point.

Escalade Incorporated

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Escalade Incorporated has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's fundamental indicators remain somewhat strong which may send shares a bit higher in June 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Crocs and Escalade Incorporated

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

The idea behind Crocs Inc and Escalade Incorporated 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.