Correlation Between National Vision and New Providence

Can any of the company-specific risk be diversified away by investing in both National Vision and New Providence 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 New Providence 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 New Providence Acquisition, you can compare the effects of market volatilities on National Vision and New Providence 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 New Providence. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Vision and New Providence.

Diversification Opportunities for National Vision and New Providence

0.13

Correlation Coefficient

National Vision  New Providence

Average diversification

The 3 months correlation between National and New is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding National Vision Holdings and New Providence Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Providence Acqui 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 New Providence. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Providence Acqui has no effect on the direction of National Vision i.e., National Vision and New Providence go up and down completely randomly.

Pair Corralation between National Vision and New Providence

Considering the 90-day investment horizon National Vision is expected to generate 1.76 times less return on investment than New Providence. In addition to that, National Vision is 1.79 times more volatile than New Providence Acquisition. It trades about 0.04 of its total potential returns per unit of risk. New Providence Acquisition is currently generating about 0.12 per unit of volatility. If you would invest  1,165  in New Providence Acquisition on October 6, 2024 and sell it today you would earn a total of  55.00  from holding New Providence Acquisition or generate 4.72% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	43.55%
Values	Daily Returns

National Vision Holdings  vs.  New Providence Acquisition

National Vision Holdings

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in National Vision Holdings are ranked lower than 3 (%) 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 February 2025.

New Providence Acqui

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days New Providence Acquisition has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively fragile fundamental drivers, New Providence may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with National Vision and New Providence

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

The idea behind National Vision Holdings and New Providence Acquisition 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.