Correlation Between Crocs and Dr Martens

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

By analyzing existing cross correlation between Crocs Inc and Dr Martens plc, you can compare the effects of market volatilities on Crocs and Dr Martens 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 Dr Martens. Check out your portfolio center. Please also check ongoing floating volatility patterns of Crocs and Dr Martens.

Diversification Opportunities for Crocs and Dr Martens

-0.09

Correlation Coefficient

Crocs  Dr Martens

Good diversification

The 3 months correlation between Crocs and DOCMF is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Crocs Inc and Dr Martens plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dr Martens plc 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 Dr Martens. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dr Martens plc has no effect on the direction of Crocs i.e., Crocs and Dr Martens go up and down completely randomly.

Pair Corralation between Crocs and Dr Martens

Given the investment horizon of 90 days Crocs Inc is expected to under-perform the Dr Martens. But the stock apears to be less risky and, when comparing its historical volatility, Crocs Inc is 1.24 times less risky than Dr Martens. The stock trades about -0.08 of its potential returns per unit of risk. The Dr Martens plc is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  88.00  in Dr Martens plc on September 16, 2024 and sell it today you would earn a total of  11.00  from holding Dr Martens plc or generate 12.5% return on investment over 90 days.

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

Crocs Inc  vs.  Dr Martens plc

Crocs Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Crocs Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Dr Martens plc

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Dr Martens plc are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal primary indicators, Dr Martens reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Crocs and Dr Martens

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

The idea behind Crocs Inc and Dr Martens plc 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.