Correlation Between CSL and VF

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

Diversification Opportunities for CSL and VF

0.72
  Correlation Coefficient

Poor diversification

The 3 months correlation between CSL and VF is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding CSL Limited and VF Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VF Corporation and CSL 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 CSL Limited are associated (or correlated) with VF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VF Corporation has no effect on the direction of CSL i.e., CSL and VF go up and down completely randomly.

Pair Corralation between CSL and VF

Assuming the 90 days horizon CSL is expected to generate 1.23 times less return on investment than VF. But when comparing it to its historical volatility, CSL Limited is 1.99 times less risky than VF. It trades about 0.39 of its potential returns per unit of risk. VF Corporation is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  2,712  in VF Corporation on September 4, 2022 and sell it today you would earn a total of  610.00  from holding VF Corporation or generate 22.49% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy95.45%
ValuesDaily Returns

CSL Limited  vs.  VF Corp.

 Performance (%) 
       Timeline  
CSL Limited 
CSL Performance
4 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in CSL Limited are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical indicators, CSL may actually be approaching a critical reversion point that can send shares even higher in January 2023.

CSL Price Channel

VF Corporation 
VF Performance
0 of 100
Over the last 90 days VF Corporation has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's technical and fundamental indicators remain somewhat strong which may send shares a bit higher in January 2023. The current disturbance may also be a sign of long term up-swing for the company investors.

VF Price Channel

CSL and VF Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with CSL and VF

The main advantage of trading using opposite CSL and VF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CSL position performs unexpectedly, VF 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 VF will offset losses from the drop in VF's long position.
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The idea behind CSL Limited and VF Corporation 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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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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.

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