Correlation Between Via Renewables and Floor Decor

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

By analyzing existing cross correlation between Via Renewables and Floor Decor Holdings, you can compare the effects of market volatilities on Via Renewables and Floor Decor 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 Via Renewables with a short position of Floor Decor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Via Renewables and Floor Decor.

Diversification Opportunities for Via Renewables and Floor Decor

0.42

Correlation Coefficient

Via Renewables  Floor Decor

Very weak diversification

The 3 months correlation between Via and Floor is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Via Renewables and Floor Decor Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Floor Decor Holdings and Via Renewables 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 Via Renewables are associated (or correlated) with Floor Decor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Floor Decor Holdings has no effect on the direction of Via Renewables i.e., Via Renewables and Floor Decor go up and down completely randomly.

Pair Corralation between Via Renewables and Floor Decor

Assuming the 90 days horizon Via Renewables is expected to generate 0.91 times more return on investment than Floor Decor. However, Via Renewables is 1.09 times less risky than Floor Decor. It trades about 0.07 of its potential returns per unit of risk. Floor Decor Holdings is currently generating about -0.09 per unit of risk. If you would invest  1,867  in Via Renewables on February 5, 2024 and sell it today you would earn a total of  108.00  from holding Via Renewables or generate 5.78% return on investment over 90 days.

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

Via Renewables  vs.  Floor Decor Holdings

Via Renewables

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Via Renewables are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Via Renewables may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Floor Decor Holdings

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Floor Decor Holdings are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Floor Decor may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Via Renewables and Floor Decor

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

The idea behind Via Renewables and Floor Decor Holdings 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.