Correlation Between Vitec Software and Advanced Medical

Can any of the company-specific risk be diversified away by investing in both Vitec Software and Advanced Medical 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 Vitec Software and Advanced Medical into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Vitec Software Group and Advanced Medical Solutions, you can compare the effects of market volatilities on Vitec Software and Advanced Medical 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 Vitec Software with a short position of Advanced Medical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vitec Software and Advanced Medical.

Diversification Opportunities for Vitec Software and Advanced Medical

-0.48

Correlation Coefficient

Vitec Software  Advanced Medical

Very good diversification

The 3 months correlation between Vitec and Advanced is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Vitec Software Group and Advanced Medical Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advanced Medical Sol and Vitec Software 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 Vitec Software Group are associated (or correlated) with Advanced Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advanced Medical Sol has no effect on the direction of Vitec Software i.e., Vitec Software and Advanced Medical go up and down completely randomly.

Pair Corralation between Vitec Software and Advanced Medical

Assuming the 90 days trading horizon Vitec Software Group is expected to generate 1.08 times more return on investment than Advanced Medical. However, Vitec Software is 1.08 times more volatile than Advanced Medical Solutions. It trades about 0.14 of its potential returns per unit of risk. Advanced Medical Solutions is currently generating about -0.19 per unit of risk. If you would invest  47,174  in Vitec Software Group on October 12, 2024 and sell it today you would earn a total of  5,634  from holding Vitec Software Group or generate 11.94% return on investment over 90 days.

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

Vitec Software Group  vs.  Advanced Medical Solutions

Vitec Software Group

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Vitec Software Group are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Vitec Software may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Advanced Medical Sol

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Advanced Medical Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Advanced Medical is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Vitec Software and Advanced Medical

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

The idea behind Vitec Software Group and Advanced Medical Solutions 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 the Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.