Correlation Between Victorias Secret and AutoNation

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

Diversification Opportunities for Victorias Secret and AutoNation

-0.78

Correlation Coefficient

Victorias Secret  AutoNation

Pay attention - limited upside

The 3 months correlation between Victorias and AutoNation is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding Victorias Secret Co and AutoNation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AutoNation 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 AutoNation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AutoNation has no effect on the direction of Victorias Secret i.e., Victorias Secret and AutoNation go up and down completely randomly.

Pair Corralation between Victorias Secret and AutoNation

Given the investment horizon of 90 days Victorias Secret Co is expected to under-perform the AutoNation. In addition to that, Victorias Secret is 1.5 times more volatile than AutoNation. It trades about -0.06 of its total potential returns per unit of risk. AutoNation is currently generating about -0.04 per unit of volatility. If you would invest  16,476  in AutoNation on February 1, 2024 and sell it today you would lose (361.00) from holding AutoNation or give up 2.19% of portfolio value over 90 days.

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

Victorias Secret Co  vs.  AutoNation

Victorias Secret

Risk-Adjusted Performance

0 of 100

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 June 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

AutoNation

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AutoNation are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent basic indicators, AutoNation may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Victorias Secret and AutoNation

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

The idea behind Victorias Secret Co and AutoNation 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.