Correlation Between Dr Martens and Wolverine World

Can any of the company-specific risk be diversified away by investing in both Dr Martens and Wolverine World 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 Wolverine World 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 Wolverine World Wide, you can compare the effects of market volatilities on Dr Martens and Wolverine World 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 Wolverine World. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dr Martens and Wolverine World.

Diversification Opportunities for Dr Martens and Wolverine World

0.34

Correlation Coefficient

Dr Martens  Wolverine World

Weak diversification

The 3 months correlation between DOCMF and Wolverine is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Dr Martens plc and Wolverine World Wide in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wolverine World Wide 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 Wolverine World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wolverine World Wide has no effect on the direction of Dr Martens i.e., Dr Martens and Wolverine World go up and down completely randomly.

Pair Corralation between Dr Martens and Wolverine World

Assuming the 90 days horizon Dr Martens is expected to generate 2.95 times less return on investment than Wolverine World. But when comparing it to its historical volatility, Dr Martens plc is 1.29 times less risky than Wolverine World. It trades about 0.07 of its potential returns per unit of risk. Wolverine World Wide is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  1,497  in Wolverine World Wide on September 17, 2024 and sell it today you would earn a total of  854.00  from holding Wolverine World Wide or generate 57.05% return on investment over 90 days.

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

Dr Martens plc  vs.  Wolverine World Wide

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.

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.

Pair Trading with Dr Martens and Wolverine World

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

The idea behind Dr Martens plc and Wolverine World Wide 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.