Correlation Between Sturm Ruger and VSE

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

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

Diversification Opportunities for Sturm Ruger and VSE

0.3

Correlation Coefficient

Sturm Ruger  VSE

Weak diversification

The 3 months correlation between Sturm and VSE is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Sturm Ruger and VSE Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VSE Corporation and Sturm Ruger 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 Sturm Ruger are associated (or correlated) with VSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VSE Corporation has no effect on the direction of Sturm Ruger i.e., Sturm Ruger and VSE go up and down completely randomly.

Pair Corralation between Sturm Ruger and VSE

Considering the 90-day investment horizon Sturm Ruger is expected to generate 0.49 times more return on investment than VSE. However, Sturm Ruger is 2.03 times less risky than VSE. It trades about -0.27 of its potential returns per unit of risk. VSE Corporation is currently generating about -0.48 per unit of risk. If you would invest  3,676  in Sturm Ruger on October 10, 2024 and sell it today you would lose (218.00) from holding Sturm Ruger or give up 5.93% of portfolio value over 90 days.

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

Sturm Ruger  vs.  VSE Corp.

Sturm Ruger

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sturm Ruger has generated negative risk-adjusted returns adding no value to investors with long positions. Even with abnormal performance in the last few months, the Stock's technical and fundamental indicators remain relatively invariable which may send shares a bit higher in February 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

VSE Corporation

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in VSE Corporation are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, VSE may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Sturm Ruger and VSE

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

The idea behind Sturm Ruger and VSE 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.