Correlation Between Vista Outdoor and Culp

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

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

Diversification Opportunities for Vista Outdoor and Culp

-0.47

Correlation Coefficient

Vista Outdoor  Culp

Very good diversification

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

Pair Corralation between Vista Outdoor and Culp

Given the investment horizon of 90 days Vista Outdoor is expected to under-perform the Culp. In addition to that, Vista Outdoor is 1.54 times more volatile than Culp Inc. It trades about 0.0 of its total potential returns per unit of risk. Culp Inc is currently generating about -0.01 per unit of volatility. If you would invest  436.00  in Culp Inc on March 9, 2024 and sell it today you would lose (1.00) from holding Culp Inc or give up 0.23% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Vista Outdoor  vs.  Culp Inc

Vista Outdoor

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vista Outdoor are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Vista Outdoor may actually be approaching a critical reversion point that can send shares even higher in July 2024.

Culp Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Culp Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unfluctuating performance in the last few months, the Stock's essential indicators remain relatively invariable which may send shares a bit higher in July 2024. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Vista Outdoor and Culp

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

The idea behind Vista Outdoor and Culp Inc 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.