Correlation Between Victorias Secret and RH

Can any of the company-specific risk be diversified away by investing in both Victorias Secret and RH 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 RH 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 RH, you can compare the effects of market volatilities on Victorias Secret and RH 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 RH. Check out your portfolio center. Please also check ongoing floating volatility patterns of Victorias Secret and RH.

Diversification Opportunities for Victorias Secret and RH

0.8

Correlation Coefficient

Victorias Secret  RH

Very poor diversification

The 3 months correlation between Victorias and RH is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Victorias Secret Co and RH in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RH 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 RH. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RH has no effect on the direction of Victorias Secret i.e., Victorias Secret and RH go up and down completely randomly.

Pair Corralation between Victorias Secret and RH

Given the investment horizon of 90 days Victorias Secret is expected to generate 1.8 times less return on investment than RH. In addition to that, Victorias Secret is 1.09 times more volatile than RH. It trades about 0.02 of its total potential returns per unit of risk. RH is currently generating about 0.04 per unit of volatility. If you would invest  29,917  in RH on October 11, 2024 and sell it today you would earn a total of  10,910  from holding RH or generate 36.47% return on investment over 90 days.

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

Victorias Secret Co  vs.  RH

Victorias Secret

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Victorias Secret Co are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain fundamental indicators, Victorias Secret displayed solid returns over the last few months and may actually be approaching a breakup point.

RH

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in RH are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain technical indicators, RH demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Victorias Secret and RH

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

The idea behind Victorias Secret Co and RH 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .