Correlation Between Vertical Aerospace and Byrna Technologies

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

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

Diversification Opportunities for Vertical Aerospace and Byrna Technologies

-0.47

Correlation Coefficient

Vertical Aerospace  Byrna Technologies

Very good diversification

The 3 months correlation between Vertical and Byrna is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Vertical Aerospace and Byrna Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Byrna Technologies and Vertical Aerospace 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 Vertical Aerospace are associated (or correlated) with Byrna Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Byrna Technologies has no effect on the direction of Vertical Aerospace i.e., Vertical Aerospace and Byrna Technologies go up and down completely randomly.

Pair Corralation between Vertical Aerospace and Byrna Technologies

Given the investment horizon of 90 days Vertical Aerospace is expected to generate 1.53 times less return on investment than Byrna Technologies. In addition to that, Vertical Aerospace is 1.33 times more volatile than Byrna Technologies. It trades about 0.08 of its total potential returns per unit of risk. Byrna Technologies is currently generating about 0.16 per unit of volatility. If you would invest  1,075  in Byrna Technologies on August 31, 2024 and sell it today you would earn a total of  830.00  from holding Byrna Technologies or generate 77.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Vertical Aerospace  vs.  Byrna Technologies

Vertical Aerospace

Risk-Adjusted Performance

6 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Vertical Aerospace are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Vertical Aerospace disclosed solid returns over the last few months and may actually be approaching a breakup point.

Byrna Technologies

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Byrna Technologies are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Byrna Technologies displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Vertical Aerospace and Byrna Technologies

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

The idea behind Vertical Aerospace and Byrna Technologies 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.