Correlation Between Somnigroup International and Virco Manufacturing

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

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

Diversification Opportunities for Somnigroup International and Virco Manufacturing

0.61

Correlation Coefficient

Somnigroup International  Virco Manufacturing

Poor diversification

The 3 months correlation between Somnigroup and Virco is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Somnigroup International and Virco Manufacturing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Virco Manufacturing and Somnigroup International 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 Somnigroup International are associated (or correlated) with Virco Manufacturing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Virco Manufacturing has no effect on the direction of Somnigroup International i.e., Somnigroup International and Virco Manufacturing go up and down completely randomly.

Pair Corralation between Somnigroup International and Virco Manufacturing

Considering the 90-day investment horizon Somnigroup International is expected to generate 1.05 times more return on investment than Virco Manufacturing. However, Somnigroup International is 1.05 times more volatile than Virco Manufacturing. It trades about -0.02 of its potential returns per unit of risk. Virco Manufacturing is currently generating about -0.17 per unit of risk. If you would invest  6,428  in Somnigroup International on February 7, 2025 and sell it today you would lose (332.00) from holding Somnigroup International or give up 5.16% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Somnigroup International  vs.  Virco Manufacturing

Somnigroup International

Risk-Adjusted Performance

Very Weak

Over the last 90 days Somnigroup International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical and fundamental indicators, Somnigroup International is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Virco Manufacturing

Risk-Adjusted Performance

Very Weak

Over the last 90 days Virco Manufacturing has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in June 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Somnigroup International and Virco Manufacturing

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

The idea behind Somnigroup International and Virco Manufacturing 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.