Correlation Between Victorias Secret and Continental

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

By analyzing existing cross correlation between Victorias Secret Co and Caleres, you can compare the effects of market volatilities on Victorias Secret and Continental 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 Victorias Secret with a short position of Continental. Check out your portfolio center. Please also check ongoing floating volatility patterns of Victorias Secret and Continental.

Diversification Opportunities for Victorias Secret and Continental

0.52

Correlation Coefficient

Victorias Secret  Continental

Very weak diversification

The 3 months correlation between Victorias and Continental is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Victorias Secret Co and Caleres in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Continental and Victorias Secret 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 Victorias Secret Co are associated (or correlated) with Continental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Continental has no effect on the direction of Victorias Secret i.e., Victorias Secret and Continental go up and down completely randomly.

Pair Corralation between Victorias Secret and Continental

Given the investment horizon of 90 days Victorias Secret Co is expected to generate 0.95 times more return on investment than Continental. However, Victorias Secret Co is 1.05 times less risky than Continental. It trades about -0.12 of its potential returns per unit of risk. Caleres is currently generating about -0.29 per unit of risk. If you would invest  3,799  in Victorias Secret Co on November 27, 2024 and sell it today you would lose (908.00) from holding Victorias Secret Co or give up 23.9% of portfolio value over 90 days.

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

Victorias Secret Co  vs.  Caleres

Victorias Secret

Risk-Adjusted Performance

Very Weak

Over the last 90 days Victorias Secret Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's fundamental indicators remain very healthy which may send shares a bit higher in March 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Continental

Risk-Adjusted Performance

Very Weak

Over the last 90 days Caleres 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 quite persistent which may send shares a bit higher in March 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Victorias Secret and Continental

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

The idea behind Victorias Secret Co and Caleres 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..