Correlation Between Exponent and VSE

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

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

Diversification Opportunities for Exponent and VSE

-0.67

Correlation Coefficient

Exponent  VSE

Excellent diversification

The 3 months correlation between Exponent and VSE is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Exponent and VSE Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VSE Corporation and Exponent 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 Exponent are associated (or correlated) with VSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VSE Corporation has no effect on the direction of Exponent i.e., Exponent and VSE go up and down completely randomly.

Pair Corralation between Exponent and VSE

Given the investment horizon of 90 days Exponent is expected to under-perform the VSE. But the stock apears to be less risky and, when comparing its historical volatility, Exponent is 1.57 times less risky than VSE. The stock trades about -0.05 of its potential returns per unit of risk. The VSE Corporation is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  8,758  in VSE Corporation on September 2, 2024 and sell it today you would earn a total of  2,968  from holding VSE Corporation or generate 33.89% return on investment over 90 days.

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

Exponent  vs.  VSE Corp.

Exponent

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Exponent has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Exponent is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

VSE Corporation

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in VSE Corporation are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile technical and fundamental indicators, VSE exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Exponent and VSE

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

The idea behind Exponent and VSE Corporation 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.