Correlation Between Skechers USA and Century Communities

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

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

Diversification Opportunities for Skechers USA and Century Communities

0.68

Correlation Coefficient

Skechers USA  Century Communities

Poor diversification

The 3 months correlation between Skechers and Century is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Skechers USA and Century Communities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Century Communities and Skechers USA 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 Skechers USA are associated (or correlated) with Century Communities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Century Communities has no effect on the direction of Skechers USA i.e., Skechers USA and Century Communities go up and down completely randomly.

Pair Corralation between Skechers USA and Century Communities

Considering the 90-day investment horizon Skechers USA is expected to generate 1.06 times more return on investment than Century Communities. However, Skechers USA is 1.06 times more volatile than Century Communities. It trades about 0.0 of its potential returns per unit of risk. Century Communities is currently generating about -0.03 per unit of risk. If you would invest  6,703  in Skechers USA on September 3, 2024 and sell it today you would lose (138.00) from holding Skechers USA or give up 2.06% of portfolio value over 90 days.

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

Skechers USA  vs.  Century Communities

Skechers USA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Skechers USA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong forward-looking signals, Skechers USA is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Century Communities

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Century Communities has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental indicators, Century Communities is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Skechers USA and Century Communities

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

The idea behind Skechers USA and Century Communities 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.