Correlation Between CoreCivic and Virco Manufacturing

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

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

Diversification Opportunities for CoreCivic and Virco Manufacturing

0.76

Correlation Coefficient

CoreCivic  Virco Manufacturing

Poor diversification

The 3 months correlation between CoreCivic and Virco is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding CoreCivic and Virco Manufacturing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Virco Manufacturing and CoreCivic 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 CoreCivic are associated (or correlated) with Virco Manufacturing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Virco Manufacturing has no effect on the direction of CoreCivic i.e., CoreCivic and Virco Manufacturing go up and down completely randomly.

Pair Corralation between CoreCivic and Virco Manufacturing

Considering the 90-day investment horizon CoreCivic is expected to generate 1.56 times more return on investment than Virco Manufacturing. However, CoreCivic is 1.56 times more volatile than Virco Manufacturing. It trades about 0.18 of its potential returns per unit of risk. Virco Manufacturing is currently generating about 0.07 per unit of risk. If you would invest  1,324  in CoreCivic on September 1, 2024 and sell it today you would earn a total of  909.00  from holding CoreCivic or generate 68.66% return on investment over 90 days.

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

CoreCivic  vs.  Virco Manufacturing

CoreCivic

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CoreCivic are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, CoreCivic showed solid returns over the last few months and may actually be approaching a breakup point.

Virco Manufacturing

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Virco Manufacturing are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Virco Manufacturing exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CoreCivic and Virco Manufacturing

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

The idea behind CoreCivic and Virco Manufacturing 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.