Correlation Between Fossil and Rocky Brands
Can any of the company-specific risk be diversified away by investing in both Fossil and Rocky Brands 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 Rocky Brands into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fossil Group and Rocky Brands, you can compare the effects of market volatilities on Fossil and Rocky Brands 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 Rocky Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fossil and Rocky Brands.
Diversification Opportunities for Fossil and Rocky Brands
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Fossil and Rocky is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Fossil Group and Rocky Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rocky Brands 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 Rocky Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rocky Brands has no effect on the direction of Fossil i.e., Fossil and Rocky Brands go up and down completely randomly.
Pair Corralation between Fossil and Rocky Brands
Given the investment horizon of 90 days Fossil Group is expected to under-perform the Rocky Brands. In addition to that, Fossil is 1.58 times more volatile than Rocky Brands. It trades about -0.08 of its total potential returns per unit of risk. Rocky Brands is currently generating about 0.09 per unit of volatility. If you would invest 2,618 in Rocky Brands on January 26, 2024 and sell it today you would earn a total of 124.00 from holding Rocky Brands or generate 4.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fossil Group vs. Rocky Brands
Performance |
| Timeline |
| Fossil Group |
| Rocky Brands |
Fossil and Rocky Brands Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fossil and Rocky Brands
The main advantage of trading using opposite Fossil and Rocky Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fossil position performs unexpectedly, Rocky Brands 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 Rocky Brands will offset losses from the drop in Rocky Brands' long position.The idea behind Fossil Group and Rocky Brands 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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