Correlation Between Mistras and VSE

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

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

Diversification Opportunities for Mistras and VSE

0.64

Correlation Coefficient

Mistras  VSE

Poor diversification

The 3 months correlation between Mistras and VSE is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Mistras Group and VSE Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VSE Corporation and Mistras 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 Mistras Group are associated (or correlated) with VSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VSE Corporation has no effect on the direction of Mistras i.e., Mistras and VSE go up and down completely randomly.

Pair Corralation between Mistras and VSE

Allowing for the 90-day total investment horizon Mistras is expected to generate 1.45 times less return on investment than VSE. But when comparing it to its historical volatility, Mistras Group is 1.4 times less risky than VSE. It trades about 0.13 of its potential returns per unit of risk. VSE Corporation is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  9,672  in VSE Corporation on December 27, 2024 and sell it today you would earn a total of  2,635  from holding VSE Corporation or generate 27.24% return on investment over 90 days.

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

Mistras Group  vs.  VSE Corp.

Mistras Group

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Mistras Group are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent technical and fundamental indicators, Mistras reported solid returns over the last few months and may actually be approaching a breakup point.

VSE Corporation

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in VSE Corporation are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, VSE exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Mistras and VSE

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

The idea behind Mistras Group and VSE Corporation 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.