Correlation Between Endava and VMware

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

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

Diversification Opportunities for Endava and VMware

0.88

Correlation Coefficient

Endava  VMware

Very poor diversification

The 3 months correlation between Endava and VMware is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Endava and VMware Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VMware Inc and Endava 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 Endava are associated (or correlated) with VMware. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VMware Inc has no effect on the direction of Endava i.e., Endava and VMware go up and down completely randomly.

Pair Corralation between Endava and VMware

Given the investment horizon of 90 days Endava is expected to under-perform the VMware. In addition to that, Endava is 2.17 times more volatile than VMware Inc. It trades about -0.04 of its total potential returns per unit of risk. VMware Inc is currently generating about 0.13 per unit of volatility. If you would invest  12,498  in VMware Inc on October 6, 2024 and sell it today you would earn a total of  3,545  from holding VMware Inc or generate 28.36% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	26.46%
Values	Daily Returns

Endava  vs.  VMware Inc

Endava

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Endava are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Endava sustained solid returns over the last few months and may actually be approaching a breakup point.

VMware Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VMware Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable primary indicators, VMware is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Endava and VMware

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

The idea behind Endava and VMware Inc 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.