Correlation Between Victorias Secret and Carvana

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

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

Diversification Opportunities for Victorias Secret and Carvana

-0.12

Correlation Coefficient

Victorias Secret  Carvana

Good diversification

The 3 months correlation between Victorias and Carvana is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Victorias Secret Co and Carvana Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carvana and Victorias Secret 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 Victorias Secret Co are associated (or correlated) with Carvana. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carvana has no effect on the direction of Victorias Secret i.e., Victorias Secret and Carvana go up and down completely randomly.

Pair Corralation between Victorias Secret and Carvana

Given the investment horizon of 90 days Victorias Secret Co is expected to under-perform the Carvana. But the stock apears to be less risky and, when comparing its historical volatility, Victorias Secret Co is 1.19 times less risky than Carvana. The stock trades about -0.07 of its potential returns per unit of risk. The Carvana Co is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  6,988  in Carvana Co on February 26, 2024 and sell it today you would earn a total of  3,927  from holding Carvana Co or generate 56.2% return on investment over 90 days.

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

Victorias Secret Co  vs.  Carvana Co

Victorias Secret

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Victorias Secret Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's fundamental indicators remain very healthy which may send shares a bit higher in June 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Carvana

Risk-Adjusted Performance

11 of 100

Good

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

Pair Trading with Victorias Secret and Carvana

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

The idea behind Victorias Secret Co and Carvana Co 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.