Correlation Between Lakeland Inds and VF Corp

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

Diversification Opportunities for Lakeland Inds and VF Corp

0.74
  Correlation Coefficient

Poor diversification

The 3 months correlation between Lakeland and VF Corp is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Lakeland Inds and VF Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VF Corp and Lakeland Inds 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 Lakeland Inds are associated (or correlated) with VF Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VF Corp has no effect on the direction of Lakeland Inds i.e., Lakeland Inds and VF Corp go up and down completely randomly.

Pair Corralation between Lakeland Inds and VF Corp

Given the investment horizon of 90 days Lakeland Inds is expected to generate 2.76 times less return on investment than VF Corp. But when comparing it to its historical volatility, Lakeland Inds is 1.66 times less risky than VF Corp. It trades about 0.02 of its potential returns per unit of risk. VF Corp is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  4,472  in VF Corp on May 12, 2022 and sell it today you would earn a total of  61.00  from holding VF Corp or generate 1.36% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy95.65%
ValuesDaily Returns

Lakeland Inds  vs.  VF Corp

 Performance (%) 
       Timeline  
Lakeland Inds 
Lakeland Performance
0 of 100
Over the last 90 days Lakeland Inds has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound forward-looking signals, Lakeland Inds is not utilizing all of its potentials. The new stock price tumult, may contribute to shorter-term losses for the shareholders.

Lakeland Price Channel

VF Corp 
VF Corp Performance
0 of 100
Over the last 90 days VF Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, VF Corp is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

VF Corp Price Channel

Lakeland Inds and VF Corp Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Lakeland Inds and VF Corp

The main advantage of trading using opposite Lakeland Inds and VF Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lakeland Inds position performs unexpectedly, VF Corp 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 Corp will offset losses from the drop in VF Corp's long position.
The idea behind Lakeland Inds and VF Corp 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.

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