Correlation Between Gap, and Victorias Secret

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

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

Diversification Opportunities for Gap, and Victorias Secret

0.84

Correlation Coefficient

Gap,  Victorias Secret

Very poor diversification

The 3 months correlation between Gap, and Victorias is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding The Gap, and Victorias Secret Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Victorias Secret and Gap, 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 The Gap, are associated (or correlated) with Victorias Secret. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Victorias Secret has no effect on the direction of Gap, i.e., Gap, and Victorias Secret go up and down completely randomly.

Pair Corralation between Gap, and Victorias Secret

Considering the 90-day investment horizon The Gap, is expected to generate 0.96 times more return on investment than Victorias Secret. However, The Gap, is 1.04 times less risky than Victorias Secret. It trades about -0.04 of its potential returns per unit of risk. Victorias Secret Co is currently generating about -0.34 per unit of risk. If you would invest  2,340  in The Gap, on December 28, 2024 and sell it today you would lose (298.00) from holding The Gap, or give up 12.74% of portfolio value over 90 days.

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

The Gap,  vs.  Victorias Secret Co

Gap,

Risk-Adjusted Performance

Very Weak

Over the last 90 days The Gap, has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest abnormal performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Victorias Secret

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Gap, and Victorias Secret

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

The idea behind The Gap, and Victorias Secret Co 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 Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.