Correlation Between Wolverine World and Escalade Incorporated

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

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

Diversification Opportunities for Wolverine World and Escalade Incorporated

-0.73

Correlation Coefficient

Wolverine World  Escalade Incorporated

Pay attention - limited upside

The 3 months correlation between Wolverine and Escalade is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Wolverine World Wide and Escalade Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Escalade Incorporated and Wolverine World 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 Wolverine World Wide 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 Wolverine World i.e., Wolverine World and Escalade Incorporated go up and down completely randomly.

Pair Corralation between Wolverine World and Escalade Incorporated

Considering the 90-day investment horizon Wolverine World Wide is expected to generate 0.73 times more return on investment than Escalade Incorporated. However, Wolverine World Wide is 1.38 times less risky than Escalade Incorporated. It trades about 0.16 of its potential returns per unit of risk. Escalade Incorporated is currently generating about 0.02 per unit of risk. If you would invest  974.00  in Wolverine World Wide on February 7, 2024 and sell it today you would earn a total of  101.00  from holding Wolverine World Wide or generate 10.37% return on investment over 90 days.

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

Wolverine World Wide  vs.  Escalade Incorporated

Wolverine World Wide

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Wolverine World Wide are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, Wolverine World 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 Wolverine World and Escalade Incorporated

The main advantage of trading using opposite Wolverine World and Escalade Incorporated positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wolverine World 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 Wolverine World Wide 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.

Check out your portfolio center.

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 Commodity Directory module to find actively traded commodities issued by global exchanges.