Correlation Between VF and Wolverine World

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

By analyzing existing cross correlation between VF Corporation and Wolverine World Wide, you can compare the effects of market volatilities on VF and Wolverine World 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 Wolverine World. Check out your portfolio center. Please also check ongoing floating volatility patterns of VF and Wolverine World.

Diversification Opportunities for VF and Wolverine World

-0.41

Correlation Coefficient

VF  Wolverine World

Very good diversification

The 3 months correlation between VF and Wolverine is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding VF Corp. and Wolverine World Wide in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wolverine World Wide 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 Wolverine World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wolverine World Wide has no effect on the direction of VF i.e., VF and Wolverine World go up and down completely randomly.

Pair Corralation between VF and Wolverine World

Considering the 90-day investment horizon VF Corporation is expected to under-perform the Wolverine World. But the stock apears to be less risky and, when comparing its historical volatility, VF Corporation is 1.08 times less risky than Wolverine World. The stock trades about -0.19 of its potential returns per unit of risk. The Wolverine World Wide is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  907.00  in Wolverine World Wide on January 20, 2024 and sell it today you would earn a total of  52.00  from holding Wolverine World Wide or generate 5.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	97.67%
Values	Daily Returns

VF Corp.  vs.  Wolverine World Wide

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 unsteady 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.

Wolverine World Wide

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Wolverine World Wide are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, Wolverine World showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with VF and Wolverine World

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

The idea behind VF Corporation and Wolverine World Wide 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.