Correlation Between VF and Levi Strauss

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

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

Diversification Opportunities for VF and Levi Strauss

-0.69

Correlation Coefficient

VF  Levi Strauss

Excellent diversification

The 3 months correlation between VF and Levi is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding VF Corp. and Levi Strauss Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Levi Strauss and VF 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 VF Corporation are associated (or correlated) with Levi Strauss. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Levi Strauss has no effect on the direction of VF i.e., VF and Levi Strauss go up and down completely randomly.

Pair Corralation between VF and Levi Strauss

Considering the 90-day investment horizon VF Corporation is expected to under-perform the Levi Strauss. But the stock apears to be less risky and, when comparing its historical volatility, VF Corporation is 1.11 times less risky than Levi Strauss. The stock trades about -0.17 of its potential returns per unit of risk. The Levi Strauss Co is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  1,871  in Levi Strauss Co on January 19, 2024 and sell it today you would earn a total of  180.00  from holding Levi Strauss Co or generate 9.62% return on investment over 90 days.

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

VF Corp.  vs.  Levi Strauss Co

VF Corporation

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VF Corporation has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in May 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Levi Strauss

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Levi Strauss Co are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain basic indicators, Levi Strauss demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with VF and Levi Strauss

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

The idea behind VF Corporation and Levi Strauss 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.