Correlation Between Virgin Group and PHINIA

Can any of the company-specific risk be diversified away by investing in both Virgin Group and PHINIA 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 PHINIA 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 PHINIA Inc, you can compare the effects of market volatilities on Virgin Group and PHINIA 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 PHINIA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Virgin Group and PHINIA.

Diversification Opportunities for Virgin Group and PHINIA

-0.26

Correlation Coefficient

Virgin Group  PHINIA

Very good diversification

The 3 months correlation between Virgin and PHINIA is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Virgin Group Acquisition and PHINIA Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PHINIA Inc 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 PHINIA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PHINIA Inc has no effect on the direction of Virgin Group i.e., Virgin Group and PHINIA go up and down completely randomly.

Pair Corralation between Virgin Group and PHINIA

Given the investment horizon of 90 days Virgin Group Acquisition is expected to generate 1.83 times more return on investment than PHINIA. However, Virgin Group is 1.83 times more volatile than PHINIA Inc. It trades about 0.07 of its potential returns per unit of risk. PHINIA Inc is currently generating about -0.03 per unit of risk. If you would invest  138.00  in Virgin Group Acquisition on December 20, 2024 and sell it today you would earn a total of  19.00  from holding Virgin Group Acquisition or generate 13.77% return on investment over 90 days.

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

Virgin Group Acquisition  vs.  PHINIA Inc

Virgin Group Acquisition

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Virgin Group Acquisition are ranked lower than 5 (%) 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.

PHINIA Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days PHINIA Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward indicators, PHINIA is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Virgin Group and PHINIA

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

The idea behind Virgin Group Acquisition and PHINIA 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.

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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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.