Correlation Between VAIV and Innodep

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

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

Diversification Opportunities for VAIV and Innodep

0.46

Correlation Coefficient

VAIV  Innodep

Very weak diversification

The 3 months correlation between VAIV and Innodep is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding VAIV Co and Innodep in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innodep 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 Innodep. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innodep has no effect on the direction of VAIV i.e., VAIV and Innodep go up and down completely randomly.

Pair Corralation between VAIV and Innodep

Assuming the 90 days trading horizon VAIV Co is expected to generate 2.24 times more return on investment than Innodep. However, VAIV is 2.24 times more volatile than Innodep. It trades about 0.07 of its potential returns per unit of risk. Innodep is currently generating about 0.02 per unit of risk. If you would invest  423,000  in VAIV Co on November 28, 2024 and sell it today you would earn a total of  69,500  from holding VAIV Co or generate 16.43% return on investment over 90 days.

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

VAIV Co  vs.  Innodep

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.

Innodep

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Innodep are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Innodep is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with VAIV and Innodep

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

The idea behind VAIV Co and Innodep 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 Search module to search for actively traded equities including funds and ETFs from over 30 global markets.