Correlation Between Honest and Virgin Group

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

By analyzing existing cross correlation between Honest Company and Virgin Group Acquisition, you can compare the effects of market volatilities on Honest and Virgin Group 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 Honest with a short position of Virgin Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Honest and Virgin Group.

Diversification Opportunities for Honest and Virgin Group

-0.46

Correlation Coefficient

Honest  Virgin Group

Very good diversification

The 3 months correlation between Honest and Virgin is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Honest Company and Virgin Group Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Virgin Group Acquisition and Honest 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 Honest Company are associated (or correlated) with Virgin Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Virgin Group Acquisition has no effect on the direction of Honest i.e., Honest and Virgin Group go up and down completely randomly.

Pair Corralation between Honest and Virgin Group

Given the investment horizon of 90 days Honest Company is expected to under-perform the Virgin Group. But the stock apears to be less risky and, when comparing its historical volatility, Honest Company is 1.22 times less risky than Virgin Group. The stock trades about -0.13 of its potential returns per unit of risk. The Virgin Group Acquisition is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  141.00  in Virgin Group Acquisition on December 29, 2024 and sell it today you would lose (7.00) from holding Virgin Group Acquisition or give up 4.96% of portfolio value over 90 days.

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

Honest Company  vs.  Virgin Group Acquisition

Honest Company

Risk-Adjusted Performance

Very Weak

Over the last 90 days Honest Company has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Virgin Group Acquisition

Risk-Adjusted Performance

Very Weak

Over the last 90 days Virgin Group Acquisition has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Virgin Group is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Honest and Virgin Group

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

The idea behind Honest Company and Virgin Group Acquisition 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.