Correlation Between National Vision and Five Below

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Can any of the company-specific risk be diversified away by investing in both National Vision and Five Below 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 National Vision and Five Below into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between National Vision Holdings and Five Below, you can compare the effects of market volatilities on National Vision and Five Below 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 National Vision with a short position of Five Below. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Vision and Five Below.

Diversification Opportunities for National Vision and Five Below

0.47
  Correlation Coefficient

Very weak diversification

The 3 months correlation between National and Five is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding National Vision Holdings and Five Below in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Five Below and National Vision 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 National Vision Holdings are associated (or correlated) with Five Below. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Five Below has no effect on the direction of National Vision i.e., National Vision and Five Below go up and down completely randomly.

Pair Corralation between National Vision and Five Below

Considering the 90-day investment horizon National Vision Holdings is expected to generate 1.38 times more return on investment than Five Below. However, National Vision is 1.38 times more volatile than Five Below. It trades about 0.04 of its potential returns per unit of risk. Five Below is currently generating about -0.01 per unit of risk. If you would invest  1,855  in National Vision Holdings on December 30, 2023 and sell it today you would earn a total of  361.00  from holding National Vision Holdings or generate 19.46% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

National Vision Holdings  vs.  Five Below

 Performance 
       Timeline  
National Vision Holdings 

Risk-Adjusted Performance

2 of 100

 
Low
 
High
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in National Vision Holdings are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, National Vision may actually be approaching a critical reversion point that can send shares even higher in April 2024.
Five Below 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days Five Below has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in April 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

National Vision and Five Below Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with National Vision and Five Below

The main advantage of trading using opposite National Vision and Five Below positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Vision position performs unexpectedly, Five Below 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 Five Below will offset losses from the drop in Five Below's long position.
The idea behind National Vision Holdings and Five Below 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.

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