Correlation Between Deluxe and Virco Manufacturing

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

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

Diversification Opportunities for Deluxe and Virco Manufacturing

0.28

Correlation Coefficient

Deluxe  Virco Manufacturing

Modest diversification

The 3 months correlation between Deluxe and Virco is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Deluxe and Virco Manufacturing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Virco Manufacturing and Deluxe 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 Deluxe 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 Deluxe i.e., Deluxe and Virco Manufacturing go up and down completely randomly.

Pair Corralation between Deluxe and Virco Manufacturing

Considering the 90-day investment horizon Deluxe is expected to under-perform the Virco Manufacturing. But the stock apears to be less risky and, when comparing its historical volatility, Deluxe is 1.17 times less risky than Virco Manufacturing. The stock trades about -0.21 of its potential returns per unit of risk. The Virco Manufacturing is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  1,018  in Virco Manufacturing on December 28, 2024 and sell it today you would lose (52.00) from holding Virco Manufacturing or give up 5.11% of portfolio value over 90 days.

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

Deluxe  vs.  Virco Manufacturing

Deluxe

Risk-Adjusted Performance

Very Weak

Over the last 90 days Deluxe has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's essential indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Virco Manufacturing

Risk-Adjusted Performance

Very Weak

Over the last 90 days Virco Manufacturing has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Virco Manufacturing is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Deluxe and Virco Manufacturing

The main advantage of trading using opposite Deluxe and Virco Manufacturing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Deluxe 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 Deluxe 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.

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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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..