Correlation Between VF and H M

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

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

Diversification Opportunities for VF and H M

0.44

Correlation Coefficient

VF  H M

Very weak diversification

The 3 months correlation between VF and HMSB is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding VF Corp. and H M Hennes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on H M Hennes and VF 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 VF Corporation are associated (or correlated) with H M. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of H M Hennes has no effect on the direction of VF i.e., VF and H M go up and down completely randomly.

Pair Corralation between VF and H M

Assuming the 90 days horizon VF Corporation is expected to generate 1.22 times more return on investment than H M. However, VF is 1.22 times more volatile than H M Hennes. It trades about 0.08 of its potential returns per unit of risk. H M Hennes is currently generating about 0.09 per unit of risk. If you would invest  1,656  in VF Corporation on September 4, 2024 and sell it today you would earn a total of  321.00  from holding VF Corporation or generate 19.38% return on investment over 90 days.

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

VF Corp.  vs.  H M Hennes

VF Corporation

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in VF Corporation are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, VF reported solid returns over the last few months and may actually be approaching a breakup point.

H M Hennes

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in H M Hennes are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, H M reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with VF and H M

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

The idea behind VF Corporation and H M Hennes 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.