Correlation Between VAIV and WISE ITech

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

By analyzing existing cross correlation between VAIV Co and WISE iTech Co, you can compare the effects of market volatilities on VAIV and WISE ITech 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 VAIV with a short position of WISE ITech. Check out your portfolio center. Please also check ongoing floating volatility patterns of VAIV and WISE ITech.

Diversification Opportunities for VAIV and WISE ITech

0.14

Correlation Coefficient

VAIV  WISE ITech

Average diversification

The 3 months correlation between VAIV and WISE is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding VAIV Co and WISE iTech Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WISE iTech and VAIV 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 VAIV Co are associated (or correlated) with WISE ITech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WISE iTech has no effect on the direction of VAIV i.e., VAIV and WISE ITech go up and down completely randomly.

Pair Corralation between VAIV and WISE ITech

Assuming the 90 days trading horizon VAIV is expected to generate 2.08 times less return on investment than WISE ITech. But when comparing it to its historical volatility, VAIV Co is 1.19 times less risky than WISE ITech. It trades about 0.07 of its potential returns per unit of risk. WISE iTech Co is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  559,000  in WISE iTech Co on December 30, 2024 and sell it today you would earn a total of  221,000  from holding WISE iTech Co or generate 39.53% return on investment over 90 days.

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

VAIV Co  vs.  WISE iTech Co

VAIV

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in VAIV Co are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, VAIV sustained solid returns over the last few months and may actually be approaching a breakup point.

WISE iTech

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in WISE iTech Co are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, WISE ITech sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with VAIV and WISE ITech

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

The idea behind VAIV Co and WISE iTech Co 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.