Correlation Between Wolverine World and On Holding

Can any of the company-specific risk be diversified away by investing in both Wolverine World and On Holding 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 Wolverine World and On Holding into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Wolverine World Wide and On Holding, you can compare the effects of market volatilities on Wolverine World and On Holding 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 Wolverine World with a short position of On Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wolverine World and On Holding.

Diversification Opportunities for Wolverine World and On Holding

0.62

Correlation Coefficient

Wolverine World  On Holding

Poor diversification

The 3 months correlation between Wolverine and ONON is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Wolverine World Wide and On Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on On Holding and Wolverine World 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 Wolverine World Wide are associated (or correlated) with On Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of On Holding has no effect on the direction of Wolverine World i.e., Wolverine World and On Holding go up and down completely randomly.

Pair Corralation between Wolverine World and On Holding

Considering the 90-day investment horizon Wolverine World is expected to generate 1.17 times less return on investment than On Holding. But when comparing it to its historical volatility, Wolverine World Wide is 1.29 times less risky than On Holding. It trades about 0.38 of its potential returns per unit of risk. On Holding is currently generating about 0.34 of returns per unit of risk over similar time horizon. If you would invest  3,129  in On Holding on March 2, 2024 and sell it today you would earn a total of  1,131  from holding On Holding or generate 36.15% return on investment over 90 days.

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

Wolverine World Wide  vs.  On Holding

Wolverine World Wide

Risk-Adjusted Performance

16 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Wolverine World Wide are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Wolverine World showed solid returns over the last few months and may actually be approaching a breakup point.

On Holding

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in On Holding are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, On Holding displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Wolverine World and On Holding

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

The idea behind Wolverine World Wide and On Holding 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.