Correlation Between Energy Focu and Virco Manufacturing

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

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

Diversification Opportunities for Energy Focu and Virco Manufacturing

0.33

Correlation Coefficient

Energy Focu  Virco Manufacturing

Weak diversification

The 3 months correlation between Energy and Virco is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Energy Focu and Virco Manufacturing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Virco Manufacturing and Energy Focu 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 Energy Focu 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 Energy Focu i.e., Energy Focu and Virco Manufacturing go up and down completely randomly.

Pair Corralation between Energy Focu and Virco Manufacturing

Given the investment horizon of 90 days Energy Focu is expected to generate 0.54 times more return on investment than Virco Manufacturing. However, Energy Focu is 1.85 times less risky than Virco Manufacturing. It trades about -0.4 of its potential returns per unit of risk. Virco Manufacturing is currently generating about -0.5 per unit of risk. If you would invest  146.00  in Energy Focu on October 4, 2024 and sell it today you would lose (27.00) from holding Energy Focu or give up 18.49% of portfolio value over 90 days.

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

Energy Focu  vs.  Virco Manufacturing

Energy Focu

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Energy Focu are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, Energy Focu is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Virco Manufacturing

Risk-Adjusted Performance

0 of 100

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 uncertain performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Energy Focu and Virco Manufacturing

The main advantage of trading using opposite Energy Focu and Virco Manufacturing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Energy Focu 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 Energy Focu 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .