Correlation Between GoPro and Deckers Outdoor

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

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

Diversification Opportunities for GoPro and Deckers Outdoor

0.14

Correlation Coefficient

GoPro  Deckers Outdoor

Average diversification

The 3 months correlation between GoPro and Deckers is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding GoPro Inc and Deckers Outdoor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deckers Outdoor and GoPro 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 GoPro Inc 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 GoPro i.e., GoPro and Deckers Outdoor go up and down completely randomly.

Pair Corralation between GoPro and Deckers Outdoor

Given the investment horizon of 90 days GoPro Inc is expected to under-perform the Deckers Outdoor. In addition to that, GoPro is 1.28 times more volatile than Deckers Outdoor. It trades about -0.1 of its total potential returns per unit of risk. Deckers Outdoor is currently generating about -0.09 per unit of volatility. If you would invest  88,884  in Deckers Outdoor on February 7, 2024 and sell it today you would lose (4,650) from holding Deckers Outdoor or give up 5.23% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

GoPro Inc  vs.  Deckers Outdoor

GoPro Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GoPro Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in June 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Deckers Outdoor

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Deckers Outdoor are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent fundamental indicators, Deckers Outdoor is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with GoPro and Deckers Outdoor

The main advantage of trading using opposite GoPro and Deckers Outdoor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GoPro 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 GoPro Inc 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.