Correlation Between Dr Martens and Continental

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

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

Diversification Opportunities for Dr Martens and Continental

-0.49

Correlation Coefficient

Dr Martens  Continental

Very good diversification

The 3 months correlation between DOCMF and Continental is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Dr Martens plc and Caleres in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Continental and Dr Martens 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 Dr Martens plc are associated (or correlated) with Continental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Continental has no effect on the direction of Dr Martens i.e., Dr Martens and Continental go up and down completely randomly.

Pair Corralation between Dr Martens and Continental

Assuming the 90 days horizon Dr Martens plc is expected to generate 1.09 times more return on investment than Continental. However, Dr Martens is 1.09 times more volatile than Caleres. It trades about 0.07 of its potential returns per unit of risk. Caleres is currently generating about -0.1 per unit of risk. If you would invest  87.00  in Dr Martens plc on September 17, 2024 and sell it today you would earn a total of  12.00  from holding Dr Martens plc or generate 13.79% return on investment over 90 days.

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

Dr Martens plc  vs.  Caleres

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.

Continental

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Caleres 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 quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Dr Martens and Continental

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

The idea behind Dr Martens plc and Caleres 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.