Correlation Between Virgin Group and Timken

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

Diversification Opportunities for Virgin Group and Timken

0.51

Correlation Coefficient

Virgin Group  Timken

Very weak diversification

The 3 months correlation between Virgin and Timken is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Virgin Group Acquisition and Timken Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Timken Company 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 Timken. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Timken Company has no effect on the direction of Virgin Group i.e., Virgin Group and Timken go up and down completely randomly.

Pair Corralation between Virgin Group and Timken

Given the investment horizon of 90 days Virgin Group Acquisition is expected to generate 2.46 times more return on investment than Timken. However, Virgin Group is 2.46 times more volatile than Timken Company. It trades about 0.09 of its potential returns per unit of risk. Timken Company is currently generating about 0.08 per unit of risk. If you would invest  137.00  in Virgin Group Acquisition on December 19, 2024 and sell it today you would earn a total of  26.00  from holding Virgin Group Acquisition or generate 18.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.33%
Values	Daily Returns

Virgin Group Acquisition  vs.  Timken Company

Virgin Group Acquisition

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Virgin Group Acquisition are ranked lower than 7 (%) 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.

Timken Company

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Timken Company are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady forward-looking signals, Timken may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Virgin Group and Timken

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

The idea behind Virgin Group Acquisition and Timken Company 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.