Correlation Between VF and Carters
Can any of the company-specific risk be diversified away by investing in both VF and Carters 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 Carters into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between VF Corporation and Carters, you can compare the effects of market volatilities on VF and Carters 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 Carters. Check out your portfolio center. Please also check ongoing floating volatility patterns of VF and Carters.
Diversification Opportunities for VF and Carters
Excellent diversification
The 3 months correlation between VF and Carters is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding VF Corp. and Carters in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carters 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 Carters. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carters has no effect on the direction of VF i.e., VF and Carters go up and down completely randomly.
Pair Corralation between VF and Carters
Considering the 90-day investment horizon VF Corporation is expected to generate 1.89 times more return on investment than Carters. However, VF is 1.89 times more volatile than Carters. It trades about 0.0 of its potential returns per unit of risk. Carters is currently generating about -0.01 per unit of risk. If you would invest 2,640 in VF Corporation on August 30, 2024 and sell it today you would lose (604.00) from holding VF Corporation or give up 22.88% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
VF Corp. vs. Carters
Performance |
| Timeline |
| VF Corporation |
| Carters |
VF and Carters Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with VF and Carters
The main advantage of trading using opposite VF and Carters positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VF position performs unexpectedly, Carters 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 Carters will offset losses from the drop in Carters' long position.The idea behind VF Corporation and Carters 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.| Carters vs. VF Corporation | Carters vs. Levi Strauss Co | Carters vs. Under Armour A | Carters vs. Columbia Sportswear |
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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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