Correlation Between Vera Bradley and CarsalesCom

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

By analyzing existing cross correlation between Vera Bradley and CarsalesCom Ltd ADR, you can compare the effects of market volatilities on Vera Bradley and CarsalesCom 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 Vera Bradley with a short position of CarsalesCom. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vera Bradley and CarsalesCom.

Diversification Opportunities for Vera Bradley and CarsalesCom

0.45

Correlation Coefficient

Vera Bradley  CarsalesCom

Very weak diversification

The 3 months correlation between Vera and CarsalesCom is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Vera Bradley and CarsalesCom Ltd ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CarsalesCom ADR and Vera Bradley 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 Vera Bradley are associated (or correlated) with CarsalesCom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CarsalesCom ADR has no effect on the direction of Vera Bradley i.e., Vera Bradley and CarsalesCom go up and down completely randomly.

Pair Corralation between Vera Bradley and CarsalesCom

Considering the 90-day investment horizon Vera Bradley is expected to generate 0.98 times more return on investment than CarsalesCom. However, Vera Bradley is 1.02 times less risky than CarsalesCom. It trades about 0.09 of its potential returns per unit of risk. CarsalesCom Ltd ADR is currently generating about 0.03 per unit of risk. If you would invest  475.00  in Vera Bradley on September 11, 2024 and sell it today you would earn a total of  63.00  from holding Vera Bradley or generate 13.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Vera Bradley  vs.  CarsalesCom Ltd ADR

Vera Bradley

Risk-Adjusted Performance

6 of 100

Modest

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

CarsalesCom ADR

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CarsalesCom Ltd ADR are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, CarsalesCom is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Vera Bradley and CarsalesCom

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

The idea behind Vera Bradley and CarsalesCom Ltd ADR 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.