Correlation Between Virco Manufacturing and Nike

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

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

Diversification Opportunities for Virco Manufacturing and Nike

0.17

Correlation Coefficient

Virco Manufacturing  Nike

Average diversification

The 3 months correlation between Virco and Nike is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Virco Manufacturing and Nike Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nike Inc 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 Nike. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nike Inc has no effect on the direction of Virco Manufacturing i.e., Virco Manufacturing and Nike go up and down completely randomly.

Pair Corralation between Virco Manufacturing and Nike

Given the investment horizon of 90 days Virco Manufacturing is expected to generate 1.33 times more return on investment than Nike. However, Virco Manufacturing is 1.33 times more volatile than Nike Inc. It trades about -0.04 of its potential returns per unit of risk. Nike Inc is currently generating about -0.1 per unit of risk. If you would invest  1,056  in Virco Manufacturing on December 27, 2024 and sell it today you would lose (94.00) from holding Virco Manufacturing or give up 8.9% of portfolio value over 90 days.

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

Virco Manufacturing  vs.  Nike Inc

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 latest weak performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Nike Inc

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Virco Manufacturing and Nike

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

The idea behind Virco Manufacturing and Nike Inc 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.