Correlation Between IRobot and Virco Manufacturing
Can any of the company-specific risk be diversified away by investing in both IRobot and Virco Manufacturing 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 IRobot and Virco Manufacturing into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iRobot and Virco Manufacturing, you can compare the effects of market volatilities on IRobot and Virco Manufacturing 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 IRobot with a short position of Virco Manufacturing. Check out your portfolio center. Please also check ongoing floating volatility patterns of IRobot and Virco Manufacturing.
Diversification Opportunities for IRobot and Virco Manufacturing
-0.33 | Correlation Coefficient |
Very good diversification
The 3 months correlation between IRobot and Virco is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding iRobot and Virco Manufacturing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Virco Manufacturing and IRobot 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 iRobot are associated (or correlated) with Virco Manufacturing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Virco Manufacturing has no effect on the direction of IRobot i.e., IRobot and Virco Manufacturing go up and down completely randomly.
Pair Corralation between IRobot and Virco Manufacturing
Given the investment horizon of 90 days iRobot is expected to under-perform the Virco Manufacturing. In addition to that, IRobot is 2.62 times more volatile than Virco Manufacturing. It trades about -0.01 of its total potential returns per unit of risk. Virco Manufacturing is currently generating about 0.18 per unit of volatility. If you would invest 1,382 in Virco Manufacturing on August 24, 2024 and sell it today you would earn a total of 201.00 from holding Virco Manufacturing or generate 14.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
iRobot vs. Virco Manufacturing
Performance |
| Timeline |
| iRobot |
| Virco Manufacturing |
IRobot and Virco Manufacturing Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IRobot and Virco Manufacturing
The main advantage of trading using opposite IRobot and Virco Manufacturing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IRobot position performs unexpectedly, Virco Manufacturing 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 Virco Manufacturing will offset losses from the drop in Virco Manufacturing's long position.The idea behind iRobot and Virco Manufacturing 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.| Virco Manufacturing vs. Bassett Furniture Industries | Virco Manufacturing vs. Hooker Furniture | Virco Manufacturing vs. Natuzzi SpA | Virco Manufacturing vs. Flexsteel Industries |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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