Correlation Between H M and VF

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

By analyzing existing cross correlation between H M Hennes and VF Corporation, you can compare the effects of market volatilities on H M and VF 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 H M with a short position of VF. Check out your portfolio center. Please also check ongoing floating volatility patterns of H M and VF.

Diversification Opportunities for H M and VF

-0.2

Correlation Coefficient

H M  VF

Good diversification

The 3 months correlation between HNNMY and VF is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding H M Hennes and VF Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VF Corporation and H M 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 H M Hennes are associated (or correlated) with VF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VF Corporation has no effect on the direction of H M i.e., H M and VF go up and down completely randomly.

Pair Corralation between H M and VF

Assuming the 90 days horizon H M Hennes is expected to generate 0.56 times more return on investment than VF. However, H M Hennes is 1.8 times less risky than VF. It trades about 0.0 of its potential returns per unit of risk. VF Corporation is currently generating about -0.14 per unit of risk. If you would invest  266.00  in H M Hennes on December 19, 2024 and sell it today you would lose (2.00) from holding H M Hennes or give up 0.75% of portfolio value over 90 days.

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

H M Hennes  vs.  VF Corp.

H M Hennes

Risk-Adjusted Performance

Very Weak

Over the last 90 days H M Hennes has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong primary indicators, H M is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

VF Corporation

Risk-Adjusted Performance

Very Weak

Over the last 90 days VF Corporation has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with H M and VF

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

The idea behind H M Hennes and VF Corporation 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.