Correlation Between Solo Brands and Vista Outdoor

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

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

Diversification Opportunities for Solo Brands and Vista Outdoor

-0.65

Correlation Coefficient

Solo Brands  Vista Outdoor

Excellent diversification

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

Pair Corralation between Solo Brands and Vista Outdoor

Considering the 90-day investment horizon Solo Brands is expected to under-perform the Vista Outdoor. In addition to that, Solo Brands is 2.68 times more volatile than Vista Outdoor. It trades about -0.02 of its total potential returns per unit of risk. Vista Outdoor is currently generating about 0.15 per unit of volatility. If you would invest  3,905  in Vista Outdoor on September 3, 2024 and sell it today you would earn a total of  558.00  from holding Vista Outdoor or generate 14.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	96.88%
Values	Daily Returns

Solo Brands  vs.  Vista Outdoor

Solo Brands

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Solo Brands has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Solo Brands is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Vista Outdoor

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vista Outdoor are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Vista Outdoor displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Solo Brands and Vista Outdoor

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

The idea behind Solo Brands and Vista Outdoor 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.