Correlation Between Vista Outdoor and Ermenegildo Zegna

Can any of the company-specific risk be diversified away by investing in both Vista Outdoor and Ermenegildo Zegna 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 Vista Outdoor and Ermenegildo Zegna into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Vista Outdoor and Ermenegildo Zegna NV, you can compare the effects of market volatilities on Vista Outdoor and Ermenegildo Zegna 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 Vista Outdoor with a short position of Ermenegildo Zegna. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vista Outdoor and Ermenegildo Zegna.

Diversification Opportunities for Vista Outdoor and Ermenegildo Zegna

-0.8

Correlation Coefficient

Vista Outdoor  Ermenegildo Zegna

Pay attention - limited upside

The 3 months correlation between Vista and Ermenegildo is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Vista Outdoor and Ermenegildo Zegna NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ermenegildo Zegna and Vista Outdoor 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 Vista Outdoor are associated (or correlated) with Ermenegildo Zegna. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ermenegildo Zegna has no effect on the direction of Vista Outdoor i.e., Vista Outdoor and Ermenegildo Zegna go up and down completely randomly.

Pair Corralation between Vista Outdoor and Ermenegildo Zegna

Given the investment horizon of 90 days Vista Outdoor is expected to generate 0.1 times more return on investment than Ermenegildo Zegna. However, Vista Outdoor is 10.23 times less risky than Ermenegildo Zegna. It trades about -0.08 of its potential returns per unit of risk. Ermenegildo Zegna NV is currently generating about -0.32 per unit of risk. If you would invest  4,427  in Vista Outdoor on August 12, 2024 and sell it today you would lose (18.00) from holding Vista Outdoor or give up 0.41% of portfolio value over 90 days.

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

Vista Outdoor  vs.  Ermenegildo Zegna NV

Vista Outdoor

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vista Outdoor are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Vista Outdoor displayed solid returns over the last few months and may actually be approaching a breakup point.

Ermenegildo Zegna

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ermenegildo Zegna NV has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's technical and fundamental indicators remain very healthy which may send shares a bit higher in December 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Vista Outdoor and Ermenegildo Zegna

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

The idea behind Vista Outdoor and Ermenegildo Zegna NV 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.