Correlation Between Deckers Outdoor and Lmp Automotive

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

By analyzing existing cross correlation between Deckers Outdoor and Lmp Automotive Holdings, you can compare the effects of market volatilities on Deckers Outdoor and Lmp Automotive 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 Lmp Automotive. Check out your portfolio center. Please also check ongoing floating volatility patterns of Deckers Outdoor and Lmp Automotive.

Diversification Opportunities for Deckers Outdoor and Lmp Automotive

-0.36

Correlation Coefficient

Deckers Outdoor  Lmp Automotive

Very good diversification

The 3 months correlation between Deckers and Lmp is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Deckers Outdoor and Lmp Automotive Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lmp Automotive Holdings 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 Lmp Automotive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lmp Automotive Holdings has no effect on the direction of Deckers Outdoor i.e., Deckers Outdoor and Lmp Automotive go up and down completely randomly.

Pair Corralation between Deckers Outdoor and Lmp Automotive

If you would invest  76,779  in Deckers Outdoor on January 26, 2024 and sell it today you would earn a total of  8,392  from holding Deckers Outdoor or generate 10.93% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	1.61%
Values	Daily Returns

Deckers Outdoor  vs.  Lmp Automotive Holdings

Deckers Outdoor

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Deckers Outdoor are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating fundamental indicators, Deckers Outdoor may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Lmp Automotive Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lmp Automotive Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Lmp Automotive is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Deckers Outdoor and Lmp Automotive

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

The idea behind Deckers Outdoor and Lmp Automotive Holdings 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.