Correlation Between Vroom and Continental

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

Diversification Opportunities for Vroom and Continental

-0.21
  Correlation Coefficient

Very good diversification

The 3 months correlation between Vroom and Continental is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Vroom Inc and Caleres in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Continental and Vroom 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 Vroom Inc are associated (or correlated) with Continental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Continental has no effect on the direction of Vroom i.e., Vroom and Continental go up and down completely randomly.

Pair Corralation between Vroom and Continental

Considering the 90-day investment horizon Vroom Inc is expected to under-perform the Continental. In addition to that, Vroom is 1.73 times more volatile than Caleres. It trades about -0.07 of its total potential returns per unit of risk. Caleres is currently generating about 0.05 per unit of volatility. If you would invest  1,238  in Caleres on September 1, 2022 and sell it today you would earn a total of  1,199  from holding Caleres or generate 96.85% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Vroom Inc  vs.  Caleres

 Performance (%) 
       Timeline  
Vroom Inc 
Vroom Performance
0 of 100
Over the last 90 days Vroom Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively steady which may send shares a bit higher in December 2022. The new chaos may also be a sign of medium-term up-swing for the company stakeholders.

Vroom Price Channel

Continental 
Continental Performance
0 of 100
Over the last 90 days Caleres has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively steady basic indicators, Continental is not utilizing all of its potentials. The latest stock price chaos, may contribute to medium-term losses for the stakeholders.

Continental Price Channel

Vroom and Continental Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Vroom and Continental

The main advantage of trading using opposite Vroom and Continental positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vroom position performs unexpectedly, Continental 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 Continental will offset losses from the drop in Continental's long position.
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The idea behind Vroom Inc and Caleres 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .

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