Correlation Between Four Leaf and National Vision

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

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

Diversification Opportunities for Four Leaf and National Vision

0.29

Correlation Coefficient

Four Leaf  National Vision

Modest diversification

The 3 months correlation between Four and National is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Four Leaf Acquisition and National Vision Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Vision Holdings and Four Leaf 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 Four Leaf Acquisition are associated (or correlated) with National Vision. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Vision Holdings has no effect on the direction of Four Leaf i.e., Four Leaf and National Vision go up and down completely randomly.

Pair Corralation between Four Leaf and National Vision

Given the investment horizon of 90 days Four Leaf is expected to generate 11.19 times less return on investment than National Vision. But when comparing it to its historical volatility, Four Leaf Acquisition is 15.16 times less risky than National Vision. It trades about 0.1 of its potential returns per unit of risk. National Vision Holdings is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  985.00  in National Vision Holdings on October 20, 2024 and sell it today you would earn a total of  95.00  from holding National Vision Holdings or generate 9.64% return on investment over 90 days.

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

Four Leaf Acquisition  vs.  National Vision Holdings

Four Leaf Acquisition

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Four Leaf Acquisition are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Four Leaf is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

National Vision Holdings

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in National Vision Holdings are ranked lower than 5 (%) 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.

Pair Trading with Four Leaf and National Vision

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

The idea behind Four Leaf Acquisition and National Vision Holdings 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.