Correlation Between National Vision and ODP Corp

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

Diversification Opportunities for National Vision and ODP Corp

-0.55

Correlation Coefficient

National Vision  ODP Corp

Excellent diversification

The 3 months correlation between National and ODP is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding National Vision Holdings and ODP Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ODP Corp 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 ODP Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ODP Corp has no effect on the direction of National Vision i.e., National Vision and ODP Corp go up and down completely randomly.

Pair Corralation between National Vision and ODP Corp

Considering the 90-day investment horizon National Vision Holdings is expected to generate 1.02 times more return on investment than ODP Corp. However, National Vision is 1.02 times more volatile than ODP Corp. It trades about 0.12 of its potential returns per unit of risk. ODP Corp is currently generating about -0.1 per unit of risk. If you would invest  1,056  in National Vision Holdings on August 30, 2024 and sell it today you would earn a total of  182.00  from holding National Vision Holdings or generate 17.23% return on investment over 90 days.

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

National Vision Holdings  vs.  ODP Corp

National Vision Holdings

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in National Vision Holdings are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent basic indicators, National Vision exhibited solid returns over the last few months and may actually be approaching a breakup point.

ODP Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ODP Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Even with conflicting performance in the last few months, the Stock's fundamental indicators remain relatively invariable which may send shares a bit higher in December 2024. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with National Vision and ODP Corp

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

The idea behind National Vision Holdings and ODP Corp 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.