Correlation Between Vera Bradley and DigiAsia Corp

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

By analyzing existing cross correlation between Vera Bradley and DigiAsia Corp, you can compare the effects of market volatilities on Vera Bradley and DigiAsia Corp 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 DigiAsia Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vera Bradley and DigiAsia Corp.

Diversification Opportunities for Vera Bradley and DigiAsia Corp

0.15

Correlation Coefficient

Vera Bradley  DigiAsia Corp

Average diversification

The 3 months correlation between Vera and DigiAsia is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Vera Bradley and DigiAsia Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DigiAsia Corp 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 DigiAsia Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DigiAsia Corp has no effect on the direction of Vera Bradley i.e., Vera Bradley and DigiAsia Corp go up and down completely randomly.

Pair Corralation between Vera Bradley and DigiAsia Corp

Considering the 90-day investment horizon Vera Bradley is expected to under-perform the DigiAsia Corp. But the stock apears to be less risky and, when comparing its historical volatility, Vera Bradley is 5.35 times less risky than DigiAsia Corp. The stock trades about -0.11 of its potential returns per unit of risk. The DigiAsia Corp is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  12.00  in DigiAsia Corp on October 21, 2024 and sell it today you would lose (1.00) from holding DigiAsia Corp or give up 8.33% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	79.03%
Values	Daily Returns

Vera Bradley  vs.  DigiAsia Corp

Vera Bradley

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vera Bradley has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

DigiAsia Corp

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in DigiAsia Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, DigiAsia Corp showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Vera Bradley and DigiAsia Corp

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

The idea behind Vera Bradley and DigiAsia Corp 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.

Check out your portfolio center.

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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.