Correlation Between Virgin Group and PROVIDENCE

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

Diversification Opportunities for Virgin Group and PROVIDENCE

0.05

Correlation Coefficient

Virgin Group  PROVIDENCE

Significant diversification

The 3 months correlation between Virgin and PROVIDENCE is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Virgin Group Acquisition and PROVIDENCE HEALTH SVCS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PROVIDENCE HEALTH SVCS 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 PROVIDENCE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PROVIDENCE HEALTH SVCS has no effect on the direction of Virgin Group i.e., Virgin Group and PROVIDENCE go up and down completely randomly.

Pair Corralation between Virgin Group and PROVIDENCE

Given the investment horizon of 90 days Virgin Group Acquisition is expected to generate 4.96 times more return on investment than PROVIDENCE. However, Virgin Group is 4.96 times more volatile than PROVIDENCE HEALTH SVCS. It trades about 0.07 of its potential returns per unit of risk. PROVIDENCE HEALTH SVCS is currently generating about 0.07 per unit of risk. If you would invest  138.00  in Virgin Group Acquisition on December 26, 2024 and sell it today you would earn a total of  18.00  from holding Virgin Group Acquisition or generate 13.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	8.33%
Values	Daily Returns

Virgin Group Acquisition  vs.  PROVIDENCE HEALTH SVCS

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.

PROVIDENCE HEALTH SVCS

Risk-Adjusted Performance

Modest

Over the last 90 days PROVIDENCE HEALTH SVCS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, PROVIDENCE is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Virgin Group and PROVIDENCE

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

The idea behind Virgin Group Acquisition and PROVIDENCE HEALTH SVCS 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.