Correlation Between Fossil and Crocs
Can any of the company-specific risk be diversified away by investing in both Fossil and Crocs 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 Fossil and Crocs into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fossil Group and Crocs Inc, you can compare the effects of market volatilities on Fossil and Crocs 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 Fossil with a short position of Crocs. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fossil and Crocs.
Diversification Opportunities for Fossil and Crocs
Excellent diversification
The 3 months correlation between Fossil and Crocs is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Fossil Group and Crocs Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Crocs Inc and Fossil 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 Fossil Group are associated (or correlated) with Crocs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Crocs Inc has no effect on the direction of Fossil i.e., Fossil and Crocs go up and down completely randomly.
Pair Corralation between Fossil and Crocs
Given the investment horizon of 90 days Fossil Group is expected to generate 2.39 times more return on investment than Crocs. However, Fossil is 2.39 times more volatile than Crocs Inc. It trades about -0.08 of its potential returns per unit of risk. Crocs Inc is currently generating about -0.26 per unit of risk. If you would invest 89.00 in Fossil Group on January 26, 2024 and sell it today you would lose (8.00) from holding Fossil Group or give up 8.99% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fossil Group vs. Crocs Inc
Performance |
| Timeline |
| Fossil Group |
| Crocs Inc |
Fossil and Crocs Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fossil and Crocs
The main advantage of trading using opposite Fossil and Crocs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fossil position performs unexpectedly, Crocs 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 Crocs will offset losses from the drop in Crocs' long position.The idea behind Fossil Group and Crocs Inc 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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