Correlation Between Volkswagen and Stitch Fix

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

By analyzing existing cross correlation between Volkswagen AG VZO and Stitch Fix, you can compare the effects of market volatilities on Volkswagen and Stitch Fix 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 Volkswagen with a short position of Stitch Fix. Check out your portfolio center. Please also check ongoing floating volatility patterns of Volkswagen and Stitch Fix.

Diversification Opportunities for Volkswagen and Stitch Fix

-0.8

Correlation Coefficient

Volkswagen  Stitch Fix

Pay attention - limited upside

The 3 months correlation between Volkswagen and Stitch is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Volkswagen AG VZO and Stitch Fix in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stitch Fix and Volkswagen 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 Volkswagen AG VZO are associated (or correlated) with Stitch Fix. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stitch Fix has no effect on the direction of Volkswagen i.e., Volkswagen and Stitch Fix go up and down completely randomly.

Pair Corralation between Volkswagen and Stitch Fix

Assuming the 90 days trading horizon Volkswagen AG VZO is expected to under-perform the Stitch Fix. But the stock apears to be less risky and, when comparing its historical volatility, Volkswagen AG VZO is 5.87 times less risky than Stitch Fix. The stock trades about -0.07 of its potential returns per unit of risk. The Stitch Fix is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  347.00  in Stitch Fix on September 13, 2024 and sell it today you would earn a total of  282.00  from holding Stitch Fix or generate 81.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Volkswagen AG VZO  vs.  Stitch Fix

Volkswagen AG VZO

Risk-Adjusted Performance

0 of 100

Very Weak

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

Stitch Fix

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Stitch Fix are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Stitch Fix reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Volkswagen and Stitch Fix

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

The idea behind Volkswagen AG VZO and Stitch Fix 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.