Correlation Between Virco Manufacturing and AMCON Distributing

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

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

Diversification Opportunities for Virco Manufacturing and AMCON Distributing

-0.4

Correlation Coefficient

Virco Manufacturing  AMCON Distributing

Very good diversification

The 3 months correlation between Virco and AMCON is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Virco Manufacturing and AMCON Distributing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AMCON Distributing 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 AMCON Distributing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AMCON Distributing has no effect on the direction of Virco Manufacturing i.e., Virco Manufacturing and AMCON Distributing go up and down completely randomly.

Pair Corralation between Virco Manufacturing and AMCON Distributing

Given the investment horizon of 90 days Virco Manufacturing is expected to generate 0.82 times more return on investment than AMCON Distributing. However, Virco Manufacturing is 1.22 times less risky than AMCON Distributing. It trades about 0.13 of its potential returns per unit of risk. AMCON Distributing is currently generating about 0.05 per unit of risk. If you would invest  1,367  in Virco Manufacturing on September 5, 2024 and sell it today you would earn a total of  241.00  from holding Virco Manufacturing or generate 17.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	97.62%
Values	Daily Returns

Virco Manufacturing  vs.  AMCON Distributing

Virco Manufacturing

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Virco Manufacturing are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, Virco Manufacturing exhibited solid returns over the last few months and may actually be approaching a breakup point.

AMCON Distributing

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in AMCON Distributing are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile forward indicators, AMCON Distributing may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Virco Manufacturing and AMCON Distributing

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

The idea behind Virco Manufacturing and AMCON Distributing 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.