Correlation Between Group 1 and Victorias Secret

Can any of the company-specific risk be diversified away by investing in both Group 1 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 Group 1 and Victorias Secret into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Group 1 Automotive and Victorias Secret Co, you can compare the effects of market volatilities on Group 1 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 Group 1 with a short position of Victorias Secret. Check out your portfolio center. Please also check ongoing floating volatility patterns of Group 1 and Victorias Secret.

Diversification Opportunities for Group 1 and Victorias Secret

0.9

Correlation Coefficient

Group 1  Victorias Secret

Almost no diversification

The 3 months correlation between Group and Victorias is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Group 1 Automotive and Victorias Secret Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Victorias Secret and Group 1 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 Group 1 Automotive 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 Group 1 i.e., Group 1 and Victorias Secret go up and down completely randomly.

Pair Corralation between Group 1 and Victorias Secret

Considering the 90-day investment horizon Group 1 Automotive is expected to generate 0.33 times more return on investment than Victorias Secret. However, Group 1 Automotive is 3.06 times less risky than Victorias Secret. It trades about -0.05 of its potential returns per unit of risk. Victorias Secret Co is currently generating about -0.28 per unit of risk. If you would invest  42,469  in Group 1 Automotive on October 10, 2024 and sell it today you would lose (509.00) from holding Group 1 Automotive or give up 1.2% of portfolio value over 90 days.

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

Group 1 Automotive  vs.  Victorias Secret Co

Group 1 Automotive

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Group 1 Automotive are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite fairly fragile basic indicators, Group 1 demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Victorias Secret

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Victorias Secret Co are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain fundamental indicators, Victorias Secret displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Group 1 and Victorias Secret

The main advantage of trading using opposite Group 1 and Victorias Secret positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Group 1 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 Group 1 Automotive 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.