Correlation Between VF and Smith Wesson

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

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

Diversification Opportunities for VF and Smith Wesson

0.92

Correlation Coefficient

VF  Smith Wesson

Almost no diversification

The 3 months correlation between VF and Smith is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding VF Corp. and Smith Wesson Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smith Wesson Brands and VF 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 VF Corporation are associated (or correlated) with Smith Wesson. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smith Wesson Brands has no effect on the direction of VF i.e., VF and Smith Wesson go up and down completely randomly.

Pair Corralation between VF and Smith Wesson

Considering the 90-day investment horizon VF Corporation is expected to under-perform the Smith Wesson. In addition to that, VF is 2.66 times more volatile than Smith Wesson Brands. It trades about -0.13 of its total potential returns per unit of risk. Smith Wesson Brands is currently generating about -0.05 per unit of volatility. If you would invest  1,026  in Smith Wesson Brands on February 3, 2025 and sell it today you would lose (85.00) from holding Smith Wesson Brands or give up 8.28% of portfolio value over 90 days.

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

VF Corp.  vs.  Smith Wesson Brands

VF Corporation

Risk-Adjusted Performance

Very Weak

Over the last 90 days VF Corporation has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in June 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Smith Wesson Brands

Risk-Adjusted Performance

Very Weak

Over the last 90 days Smith Wesson Brands has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's fundamental drivers remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with VF and Smith Wesson

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

The idea behind VF Corporation and Smith Wesson Brands 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 Commodity Directory module to find actively traded commodities issued by global exchanges.