Correlation Between VSE and Quest Resource

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

By analyzing existing cross correlation between VSE Corporation and Quest Resource Holding, you can compare the effects of market volatilities on VSE and Quest Resource 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 VSE with a short position of Quest Resource. Check out your portfolio center. Please also check ongoing floating volatility patterns of VSE and Quest Resource.

Diversification Opportunities for VSE and Quest Resource

-0.83

Correlation Coefficient

VSE  Quest Resource

Pay attention - limited upside

The 3 months correlation between VSE and Quest is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding VSE Corp. and Quest Resource Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Quest Resource Holding and VSE 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 VSE Corporation are associated (or correlated) with Quest Resource. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Quest Resource Holding has no effect on the direction of VSE i.e., VSE and Quest Resource go up and down completely randomly.

Pair Corralation between VSE and Quest Resource

Given the investment horizon of 90 days VSE Corporation is expected to generate 1.31 times more return on investment than Quest Resource. However, VSE is 1.31 times more volatile than Quest Resource Holding. It trades about 0.15 of its potential returns per unit of risk. Quest Resource Holding is currently generating about -0.15 per unit of risk. If you would invest  8,783  in VSE Corporation on September 13, 2024 and sell it today you would earn a total of  2,768  from holding VSE Corporation or generate 31.52% return on investment over 90 days.

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

VSE Corp.  vs.  Quest Resource Holding

VSE Corporation

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in VSE Corporation are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile technical and fundamental indicators, VSE exhibited solid returns over the last few months and may actually be approaching a breakup point.

Quest Resource Holding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Quest Resource Holding has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with VSE and Quest Resource

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

The idea behind VSE Corporation and Quest Resource Holding 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.