Correlation Between VSE and Cadre Holdings

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

By analyzing existing cross correlation between VSE Corporation and Cadre Holdings, you can compare the effects of market volatilities on VSE and Cadre Holdings 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 VSE with a short position of Cadre Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of VSE and Cadre Holdings.

Diversification Opportunities for VSE and Cadre Holdings

-0.62

Correlation Coefficient

VSE  Cadre Holdings

Excellent diversification

The 3 months correlation between VSE and Cadre is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding VSE Corp. and Cadre Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cadre Holdings and VSE 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 VSE Corporation are associated (or correlated) with Cadre Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cadre Holdings has no effect on the direction of VSE i.e., VSE and Cadre Holdings go up and down completely randomly.

Pair Corralation between VSE and Cadre Holdings

Given the investment horizon of 90 days VSE Corporation is expected to generate 1.45 times more return on investment than Cadre Holdings. However, VSE is 1.45 times more volatile than Cadre Holdings. It trades about 0.15 of its potential returns per unit of risk. Cadre Holdings is currently generating about -0.04 per unit of risk. If you would invest  9,157  in VSE Corporation on September 13, 2024 and sell it today you would earn a total of  2,146  from holding VSE Corporation or generate 23.44% return on investment over 90 days.

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

VSE Corp.  vs.  Cadre Holdings

VSE Corporation

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in VSE Corporation are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile technical and fundamental indicators, VSE exhibited solid returns over the last few months and may actually be approaching a breakup point.

Cadre Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cadre Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Cadre Holdings is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with VSE and Cadre Holdings

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

The idea behind VSE Corporation and Cadre Holdings 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.