Correlation Between Zumiez and Vera Bradley

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

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

Diversification Opportunities for Zumiez and Vera Bradley

0.34

Correlation Coefficient

Zumiez  Vera Bradley

Weak diversification

The 3 months correlation between Zumiez and Vera is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Zumiez Inc and Vera Bradley in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vera Bradley and Zumiez 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 Zumiez Inc are associated (or correlated) with Vera Bradley. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vera Bradley has no effect on the direction of Zumiez i.e., Zumiez and Vera Bradley go up and down completely randomly.

Pair Corralation between Zumiez and Vera Bradley

Given the investment horizon of 90 days Zumiez Inc is expected to generate 1.12 times more return on investment than Vera Bradley. However, Zumiez is 1.12 times more volatile than Vera Bradley. It trades about -0.02 of its potential returns per unit of risk. Vera Bradley is currently generating about -0.04 per unit of risk. If you would invest  2,244  in Zumiez Inc on September 14, 2024 and sell it today you would lose (192.00) from holding Zumiez Inc or give up 8.56% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Zumiez Inc  vs.  Vera Bradley

Zumiez Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zumiez Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong primary indicators, Zumiez is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Vera Bradley

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vera Bradley has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Zumiez and Vera Bradley

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

The idea behind Zumiez Inc and Vera Bradley 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.