Correlation Between Deckers Outdoor and Goldcliff Resource

Can any of the company-specific risk be diversified away by investing in both Deckers Outdoor and Goldcliff Resource 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 Deckers Outdoor and Goldcliff Resource into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Deckers Outdoor and Goldcliff Resource

0.31

Correlation Coefficient

Deckers Outdoor  Goldcliff Resource

Weak diversification

The 3 months correlation between Deckers and Goldcliff is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Deckers Outdoor and Goldcliff Resource in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldcliff Resource and Deckers Outdoor 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 Deckers Outdoor are associated (or correlated) with Goldcliff Resource. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Goldcliff Resource has no effect on the direction of Deckers Outdoor i.e., Deckers Outdoor and Goldcliff Resource go up and down completely randomly.

Pair Corralation between Deckers Outdoor and Goldcliff Resource

Given the investment horizon of 90 days Deckers Outdoor is expected to generate 0.37 times more return on investment than Goldcliff Resource. However, Deckers Outdoor is 2.73 times less risky than Goldcliff Resource. It trades about -0.22 of its potential returns per unit of risk. Goldcliff Resource is currently generating about -0.14 per unit of risk. If you would invest  94,126  in Deckers Outdoor on January 28, 2024 and sell it today you would lose (10,780) from holding Deckers Outdoor or give up 11.45% of portfolio value over 90 days.

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

Deckers Outdoor  vs.  Goldcliff Resource

Deckers Outdoor

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Deckers Outdoor are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain fundamental indicators, Deckers Outdoor may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Goldcliff Resource

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Goldcliff Resource has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in May 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Deckers Outdoor and Goldcliff Resource

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

The idea behind Deckers Outdoor and Goldcliff Resource 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.