Correlation Between Victory Global and Bright Rock

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

By analyzing existing cross correlation between Victory Global Natural and Bright Rock Mid, you can compare the effects of market volatilities on Victory Global and Bright Rock 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 Victory Global with a short position of Bright Rock. Check out your portfolio center. Please also check ongoing floating volatility patterns of Victory Global and Bright Rock.

Diversification Opportunities for Victory Global and Bright Rock

0.73

Correlation Coefficient

Victory Global  Bright Rock

Poor diversification

The 3 months correlation between Victory and Bright is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Victory Global Natural and Bright Rock Mid in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bright Rock Mid and Victory Global 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 Victory Global Natural are associated (or correlated) with Bright Rock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bright Rock Mid has no effect on the direction of Victory Global i.e., Victory Global and Bright Rock go up and down completely randomly.

Pair Corralation between Victory Global and Bright Rock

Assuming the 90 days horizon Victory Global Natural is expected to generate 1.89 times more return on investment than Bright Rock. However, Victory Global is 1.89 times more volatile than Bright Rock Mid. It trades about 0.22 of its potential returns per unit of risk. Bright Rock Mid is currently generating about 0.19 per unit of risk. If you would invest  2,409  in Victory Global Natural on September 12, 2024 and sell it today you would earn a total of  460.00  from holding Victory Global Natural or generate 19.1% return on investment over 90 days.

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

Victory Global Natural  vs.  Bright Rock Mid

Victory Global Natural

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Victory Global Natural are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Victory Global showed solid returns over the last few months and may actually be approaching a breakup point.

Bright Rock Mid

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bright Rock Mid are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Bright Rock may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Victory Global and Bright Rock

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

The idea behind Victory Global Natural and Bright Rock Mid 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.