Correlation Between CarsalesCom and Vera Bradley

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

By analyzing existing cross correlation between CarsalesCom Ltd ADR and Vera Bradley, you can compare the effects of market volatilities on CarsalesCom and Vera Bradley 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 CarsalesCom with a short position of Vera Bradley. Check out your portfolio center. Please also check ongoing floating volatility patterns of CarsalesCom and Vera Bradley.

Diversification Opportunities for CarsalesCom and Vera Bradley

0.45

Correlation Coefficient

CarsalesCom  Vera Bradley

Very weak diversification

The 3 months correlation between CarsalesCom and Vera is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding CarsalesCom Ltd ADR and Vera Bradley in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vera Bradley and CarsalesCom 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 CarsalesCom Ltd ADR are associated (or correlated) with Vera Bradley. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vera Bradley has no effect on the direction of CarsalesCom i.e., CarsalesCom and Vera Bradley go up and down completely randomly.

Pair Corralation between CarsalesCom and Vera Bradley

Assuming the 90 days horizon CarsalesCom is expected to generate 3.38 times less return on investment than Vera Bradley. In addition to that, CarsalesCom is 1.02 times more volatile than Vera Bradley. It trades about 0.03 of its total potential returns per unit of risk. Vera Bradley is currently generating about 0.09 per unit of volatility. If you would invest  475.00  in Vera Bradley on September 11, 2024 and sell it today you would earn a total of  63.00  from holding Vera Bradley or generate 13.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

CarsalesCom Ltd ADR  vs.  Vera Bradley

CarsalesCom ADR

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CarsalesCom Ltd ADR are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, CarsalesCom is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Vera Bradley

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Vera Bradley are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Vera Bradley sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CarsalesCom and Vera Bradley

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

The idea behind CarsalesCom Ltd ADR and Vera Bradley 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.