Correlation Between VSE and Quad Graphics

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

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

Diversification Opportunities for VSE and Quad Graphics

-0.65

Correlation Coefficient

VSE  Quad Graphics

Excellent diversification

The 3 months correlation between VSE and Quad is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding VSE Corp. and Quad Graphics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Quad Graphics 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 Quad Graphics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Quad Graphics has no effect on the direction of VSE i.e., VSE and Quad Graphics go up and down completely randomly.

Pair Corralation between VSE and Quad Graphics

Given the investment horizon of 90 days VSE Corporation is expected to generate 0.85 times more return on investment than Quad Graphics. However, VSE Corporation is 1.17 times less risky than Quad Graphics. It trades about 0.09 of its potential returns per unit of risk. Quad Graphics is currently generating about -0.07 per unit of risk. If you would invest  9,399  in VSE Corporation on January 11, 2025 and sell it today you would earn a total of  1,845  from holding VSE Corporation or generate 19.63% 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.  Quad Graphics

VSE Corporation

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in VSE Corporation are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, VSE exhibited solid returns over the last few months and may actually be approaching a breakup point.

Quad Graphics

Risk-Adjusted Performance

Very Weak

Over the last 90 days Quad Graphics 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 basic indicators remain rather sound which may send shares a bit higher in May 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with VSE and Quad Graphics

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

The idea behind VSE Corporation and Quad Graphics 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.

Check out your portfolio center.

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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.