Correlation Between Victorias Secret and Sea

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

Diversification Opportunities for Victorias Secret and Sea

0.84

Correlation Coefficient

Victorias Secret  Sea

Very poor diversification

The 3 months correlation between Victorias and Sea is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Victorias Secret Co and Sea in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sea 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 Sea. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sea has no effect on the direction of Victorias Secret i.e., Victorias Secret and Sea go up and down completely randomly.

Pair Corralation between Victorias Secret and Sea

Given the investment horizon of 90 days Victorias Secret Co is expected to under-perform the Sea. In addition to that, Victorias Secret is 1.72 times more volatile than Sea. It trades about -0.28 of its total potential returns per unit of risk. Sea is currently generating about -0.18 per unit of volatility. If you would invest  11,415  in Sea on October 10, 2024 and sell it today you would lose (773.00) from holding Sea or give up 6.77% of portfolio value over 90 days.

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

Victorias Secret Co  vs.  Sea

Victorias Secret

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Victorias Secret Co are ranked lower than 18 (%) 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.

Sea

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sea are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Sea may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Victorias Secret and Sea

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

The idea behind Victorias Secret Co and Sea 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.