Correlation Between Virgin Group and Ares Acquisition

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

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

Diversification Opportunities for Virgin Group and Ares Acquisition

-0.2

Correlation Coefficient

Virgin Group  Ares Acquisition

Good diversification

The 3 months correlation between Virgin and Ares is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Virgin Group Acquisition and Ares Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ares Acquisition and Virgin Group 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 Virgin Group Acquisition are associated (or correlated) with Ares Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ares Acquisition has no effect on the direction of Virgin Group i.e., Virgin Group and Ares Acquisition go up and down completely randomly.

Pair Corralation between Virgin Group and Ares Acquisition

Given the investment horizon of 90 days Virgin Group Acquisition is expected to generate 13.45 times more return on investment than Ares Acquisition. However, Virgin Group is 13.45 times more volatile than Ares Acquisition. It trades about 0.01 of its potential returns per unit of risk. Ares Acquisition is currently generating about 0.05 per unit of risk. If you would invest  267.00  in Virgin Group Acquisition on October 11, 2024 and sell it today you would lose (91.00) from holding Virgin Group Acquisition or give up 34.08% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	87.1%
Values	Daily Returns

Virgin Group Acquisition  vs.  Ares Acquisition

Virgin Group Acquisition

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Virgin Group Acquisition are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Virgin Group showed solid returns over the last few months and may actually be approaching a breakup point.

Ares Acquisition

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ares Acquisition are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Ares Acquisition is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Virgin Group and Ares Acquisition

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

The idea behind Virgin Group Acquisition and Ares Acquisition 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.