Correlation Between ExGen Resources and VVC Exploration

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

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

Diversification Opportunities for ExGen Resources and VVC Exploration

0.15

Correlation Coefficient

ExGen Resources  VVC Exploration

Average diversification

The 3 months correlation between ExGen and VVC is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding ExGen Resources and VVC Exploration Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VVC Exploration Corp and ExGen Resources 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 ExGen Resources are associated (or correlated) with VVC Exploration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VVC Exploration Corp has no effect on the direction of ExGen Resources i.e., ExGen Resources and VVC Exploration go up and down completely randomly.

Pair Corralation between ExGen Resources and VVC Exploration

Assuming the 90 days horizon ExGen Resources is expected to generate 1.37 times more return on investment than VVC Exploration. However, ExGen Resources is 1.37 times more volatile than VVC Exploration Corp. It trades about 0.02 of its potential returns per unit of risk. VVC Exploration Corp is currently generating about -0.04 per unit of risk. If you would invest  8.00  in ExGen Resources on October 20, 2024 and sell it today you would lose (1.00) from holding ExGen Resources or give up 12.5% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

ExGen Resources  vs.  VVC Exploration Corp

ExGen Resources

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ExGen Resources are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, ExGen Resources may actually be approaching a critical reversion point that can send shares even higher in February 2025.

VVC Exploration Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VVC Exploration Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with ExGen Resources and VVC Exploration

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

The idea behind ExGen Resources and VVC Exploration Corp 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.