Correlation Between Under Armour and Crocs

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

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

Diversification Opportunities for Under Armour and Crocs

-0.29

Correlation Coefficient

Under Armour  Crocs

Very good diversification

The 3 months correlation between Under and Crocs is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Under Armour C and Crocs Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Crocs Inc and Under Armour 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 Under Armour C are associated (or correlated) with Crocs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Crocs Inc has no effect on the direction of Under Armour i.e., Under Armour and Crocs go up and down completely randomly.

Pair Corralation between Under Armour and Crocs

Allowing for the 90-day total investment horizon Under Armour is expected to generate 2.98 times less return on investment than Crocs. But when comparing it to its historical volatility, Under Armour C is 1.72 times less risky than Crocs. It trades about 0.25 of its potential returns per unit of risk. Crocs Inc is currently generating about 0.43 of returns per unit of risk over similar time horizon. If you would invest  12,355  in Crocs Inc on March 2, 2024 and sell it today you would earn a total of  3,209  from holding Crocs Inc or generate 25.97% return on investment over 90 days.

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

Under Armour C  vs.  Crocs Inc

Under Armour C

Risk-Adjusted Performance

0 of 100

Very Weak

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

Crocs Inc

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Crocs Inc are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting basic indicators, Crocs showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Under Armour and Crocs

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

The idea behind Under Armour C and Crocs 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.