Correlation Between National Vision and Cool

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

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

Diversification Opportunities for National Vision and Cool

-0.66

Correlation Coefficient

National Vision  Cool

Excellent diversification

The 3 months correlation between National and Cool is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding National Vision Holdings and Cool Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cool Company and National Vision 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 National Vision Holdings are associated (or correlated) with Cool. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cool Company has no effect on the direction of National Vision i.e., National Vision and Cool go up and down completely randomly.

Pair Corralation between National Vision and Cool

Considering the 90-day investment horizon National Vision Holdings is expected to generate 0.94 times more return on investment than Cool. However, National Vision Holdings is 1.06 times less risky than Cool. It trades about 0.08 of its potential returns per unit of risk. Cool Company is currently generating about -0.22 per unit of risk. If you would invest  1,019  in National Vision Holdings on September 5, 2024 and sell it today you would earn a total of  115.00  from holding National Vision Holdings or generate 11.29% return on investment over 90 days.

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

National Vision Holdings  vs.  Cool Company

National Vision Holdings

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in National Vision Holdings are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent basic indicators, National Vision may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Cool Company

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cool Company has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's fundamental indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with National Vision and Cool

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

The idea behind National Vision Holdings and Cool Company 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.