Correlation Between Virco Manufacturing and BrightView Holdings

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

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

Diversification Opportunities for Virco Manufacturing and BrightView Holdings

0.27

Correlation Coefficient

Virco Manufacturing  BrightView Holdings

Modest diversification

The 3 months correlation between Virco and BrightView is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Virco Manufacturing and BrightView Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BrightView Holdings and Virco Manufacturing 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 Virco Manufacturing are associated (or correlated) with BrightView Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BrightView Holdings has no effect on the direction of Virco Manufacturing i.e., Virco Manufacturing and BrightView Holdings go up and down completely randomly.

Pair Corralation between Virco Manufacturing and BrightView Holdings

Given the investment horizon of 90 days Virco Manufacturing is expected to generate 2.02 times more return on investment than BrightView Holdings. However, Virco Manufacturing is 2.02 times more volatile than BrightView Holdings. It trades about 0.0 of its potential returns per unit of risk. BrightView Holdings is currently generating about -0.14 per unit of risk. If you would invest  1,119  in Virco Manufacturing on January 31, 2024 and sell it today you would lose (19.00) from holding Virco Manufacturing or give up 1.7% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Virco Manufacturing  vs.  BrightView Holdings

Virco Manufacturing

Risk-Adjusted Performance

0 of 100

Very Weak

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

BrightView Holdings

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in BrightView Holdings are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, BrightView Holdings showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Virco Manufacturing and BrightView Holdings

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

The idea behind Virco Manufacturing and BrightView 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 Global Correlations module to find global opportunities by holding instruments from different markets.