Correlation Between Virco Manufacturing and YHN Acquisition

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

By analyzing existing cross correlation between Virco Manufacturing and YHN Acquisition I, you can compare the effects of market volatilities on Virco Manufacturing and YHN Acquisition 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 Virco Manufacturing with a short position of YHN Acquisition. Check out your portfolio center. Please also check ongoing floating volatility patterns of Virco Manufacturing and YHN Acquisition.

Diversification Opportunities for Virco Manufacturing and YHN Acquisition

0.04

Correlation Coefficient

Virco Manufacturing  YHN Acquisition

Significant diversification

The 3 months correlation between Virco and YHN is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Virco Manufacturing and YHN Acquisition I in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on YHN Acquisition I and Virco Manufacturing 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 Virco Manufacturing are associated (or correlated) with YHN Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of YHN Acquisition I has no effect on the direction of Virco Manufacturing i.e., Virco Manufacturing and YHN Acquisition go up and down completely randomly.

Pair Corralation between Virco Manufacturing and YHN Acquisition

Given the investment horizon of 90 days Virco Manufacturing is expected to generate 323.59 times less return on investment than YHN Acquisition. But when comparing it to its historical volatility, Virco Manufacturing is 89.16 times less risky than YHN Acquisition. It trades about 0.08 of its potential returns per unit of risk. YHN Acquisition I is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest  0.00  in YHN Acquisition I on September 4, 2024 and sell it today you would earn a total of  11.00  from holding YHN Acquisition I or generate 9.223372036854776E16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	17.19%
Values	Daily Returns

Virco Manufacturing  vs.  YHN Acquisition I

Virco Manufacturing

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Virco Manufacturing are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, Virco Manufacturing exhibited solid returns over the last few months and may actually be approaching a breakup point.

YHN Acquisition I

Risk-Adjusted Performance

0 of 100

Solid

Over the last 90 days YHN Acquisition I has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively uncertain basic indicators, YHN Acquisition reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Virco Manufacturing and YHN Acquisition

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

The idea behind Virco Manufacturing and YHN Acquisition I 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.