Correlation Between Virco Manufacturing and Brinks

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

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

Diversification Opportunities for Virco Manufacturing and Brinks

0.54

Correlation Coefficient

Virco Manufacturing  Brinks

Very weak diversification

The 3 months correlation between Virco and Brinks is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Virco Manufacturing and Brinks Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brinks Company and Virco Manufacturing 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 Virco Manufacturing are associated (or correlated) with Brinks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brinks Company has no effect on the direction of Virco Manufacturing i.e., Virco Manufacturing and Brinks go up and down completely randomly.

Pair Corralation between Virco Manufacturing and Brinks

Given the investment horizon of 90 days Virco Manufacturing is expected to under-perform the Brinks. In addition to that, Virco Manufacturing is 2.49 times more volatile than Brinks Company. It trades about -0.08 of its total potential returns per unit of risk. Brinks Company is currently generating about -0.07 per unit of volatility. If you would invest  10,389  in Brinks Company on November 27, 2024 and sell it today you would lose (944.00) from holding Brinks Company or give up 9.09% of portfolio value over 90 days.

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

Virco Manufacturing  vs.  Brinks Company

Virco Manufacturing

Risk-Adjusted Performance

Very Weak

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

Brinks Company

Risk-Adjusted Performance

Very Weak

Over the last 90 days Brinks Company has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Brinks is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Virco Manufacturing and Brinks

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

The idea behind Virco Manufacturing and Brinks Company 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.