Correlation Between Papaya Growth and Skechers USA

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

By analyzing existing cross correlation between Papaya Growth Opportunity and Skechers USA, you can compare the effects of market volatilities on Papaya Growth and Skechers USA 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 Papaya Growth with a short position of Skechers USA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Papaya Growth and Skechers USA.

Diversification Opportunities for Papaya Growth and Skechers USA

0.32

Correlation Coefficient

Papaya Growth  Skechers USA

Weak diversification

The 3 months correlation between Papaya and Skechers is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Papaya Growth Opportunity and Skechers USA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Skechers USA and Papaya Growth 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 Papaya Growth Opportunity are associated (or correlated) with Skechers USA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Skechers USA has no effect on the direction of Papaya Growth i.e., Papaya Growth and Skechers USA go up and down completely randomly.

Pair Corralation between Papaya Growth and Skechers USA

Assuming the 90 days horizon Papaya Growth Opportunity is expected to generate 0.49 times more return on investment than Skechers USA. However, Papaya Growth Opportunity is 2.04 times less risky than Skechers USA. It trades about -0.02 of its potential returns per unit of risk. Skechers USA is currently generating about -0.02 per unit of risk. If you would invest  1,158  in Papaya Growth Opportunity on September 23, 2024 and sell it today you would lose (39.00) from holding Papaya Growth Opportunity or give up 3.37% of portfolio value over 90 days.

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

Papaya Growth Opportunity  vs.  Skechers USA

Papaya Growth Opportunity

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Papaya Growth Opportunity are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Papaya Growth is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Skechers USA

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Skechers USA are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain forward-looking signals, Skechers USA may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Papaya Growth and Skechers USA

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

The idea behind Papaya Growth Opportunity and Skechers USA 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.