Correlation Between INTERNATIONAL ENERGY and VETIVA BANKING

Can any of the company-specific risk be diversified away by investing in both INTERNATIONAL ENERGY and VETIVA BANKING 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 INTERNATIONAL ENERGY and VETIVA BANKING into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between INTERNATIONAL ENERGY INSURANCE and VETIVA BANKING ETF, you can compare the effects of market volatilities on INTERNATIONAL ENERGY and VETIVA BANKING 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 INTERNATIONAL ENERGY with a short position of VETIVA BANKING. Check out your portfolio center. Please also check ongoing floating volatility patterns of INTERNATIONAL ENERGY and VETIVA BANKING.

Diversification Opportunities for INTERNATIONAL ENERGY and VETIVA BANKING

0.33

Correlation Coefficient

INTERNATIONAL ENERGY  VETIVA BANKING

Weak diversification

The 3 months correlation between INTERNATIONAL and VETIVA is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding INTERNATIONAL ENERGY INSURANCE and VETIVA BANKING ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VETIVA BANKING ETF and INTERNATIONAL ENERGY 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 INTERNATIONAL ENERGY INSURANCE are associated (or correlated) with VETIVA BANKING. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VETIVA BANKING ETF has no effect on the direction of INTERNATIONAL ENERGY i.e., INTERNATIONAL ENERGY and VETIVA BANKING go up and down completely randomly.

Pair Corralation between INTERNATIONAL ENERGY and VETIVA BANKING

Assuming the 90 days trading horizon INTERNATIONAL ENERGY INSURANCE is expected to generate 4.32 times more return on investment than VETIVA BANKING. However, INTERNATIONAL ENERGY is 4.32 times more volatile than VETIVA BANKING ETF. It trades about 0.27 of its potential returns per unit of risk. VETIVA BANKING ETF is currently generating about 0.29 per unit of risk. If you would invest  147.00  in INTERNATIONAL ENERGY INSURANCE on October 8, 2024 and sell it today you would earn a total of  40.00  from holding INTERNATIONAL ENERGY INSURANCE or generate 27.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

INTERNATIONAL ENERGY INSURANCE  vs.  VETIVA BANKING ETF

INTERNATIONAL ENERGY

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in INTERNATIONAL ENERGY INSURANCE are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, INTERNATIONAL ENERGY reported solid returns over the last few months and may actually be approaching a breakup point.

VETIVA BANKING ETF

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in VETIVA BANKING ETF are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite quite fragile basic indicators, VETIVA BANKING disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with INTERNATIONAL ENERGY and VETIVA BANKING

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

The idea behind INTERNATIONAL ENERGY INSURANCE and VETIVA BANKING ETF 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.