Correlation Between VAIV and Dream Security

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

By analyzing existing cross correlation between VAIV Co and Dream Security co, you can compare the effects of market volatilities on VAIV and Dream Security 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 Dream Security. Check out your portfolio center. Please also check ongoing floating volatility patterns of VAIV and Dream Security.

Diversification Opportunities for VAIV and Dream Security

0.25

Correlation Coefficient

VAIV  Dream Security

Modest diversification

The 3 months correlation between VAIV and Dream is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding VAIV Co and Dream Security co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dream Security co 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 Dream Security. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dream Security co has no effect on the direction of VAIV i.e., VAIV and Dream Security go up and down completely randomly.

Pair Corralation between VAIV and Dream Security

Assuming the 90 days trading horizon VAIV Co is expected to generate 2.08 times more return on investment than Dream Security. However, VAIV is 2.08 times more volatile than Dream Security co. It trades about 0.07 of its potential returns per unit of risk. Dream Security co is currently generating about -0.1 per unit of risk. If you would invest  374,000  in VAIV Co on December 30, 2024 and sell it today you would earn a total of  54,500  from holding VAIV Co or generate 14.57% return on investment over 90 days.

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

VAIV Co  vs.  Dream Security 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.

Dream Security co

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dream Security co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with VAIV and Dream Security

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

The idea behind VAIV Co and Dream Security 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.

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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.