Correlation Between Victory Integrity and Extreme Networks

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

By analyzing existing cross correlation between Victory Integrity Smallmid Cap and Extreme Networks, you can compare the effects of market volatilities on Victory Integrity and Extreme Networks 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 Victory Integrity with a short position of Extreme Networks. Check out your portfolio center. Please also check ongoing floating volatility patterns of Victory Integrity and Extreme Networks.

Diversification Opportunities for Victory Integrity and Extreme Networks

0.62

Correlation Coefficient

Victory Integrity  Extreme Networks

Poor diversification

The 3 months correlation between Victory and Extreme is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Victory Integrity Smallmid Cap and Extreme Networks in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Extreme Networks and Victory Integrity 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 Victory Integrity Smallmid Cap are associated (or correlated) with Extreme Networks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Extreme Networks has no effect on the direction of Victory Integrity i.e., Victory Integrity and Extreme Networks go up and down completely randomly.

Pair Corralation between Victory Integrity and Extreme Networks

Assuming the 90 days horizon Victory Integrity Smallmid Cap is expected to generate 0.54 times more return on investment than Extreme Networks. However, Victory Integrity Smallmid Cap is 1.87 times less risky than Extreme Networks. It trades about -0.09 of its potential returns per unit of risk. Extreme Networks is currently generating about -0.1 per unit of risk. If you would invest  2,126  in Victory Integrity Smallmid Cap on December 29, 2024 and sell it today you would lose (137.00) from holding Victory Integrity Smallmid Cap or give up 6.44% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.39%
Values	Daily Returns

Victory Integrity Smallmid Cap  vs.  Extreme Networks

Victory Integrity

Risk-Adjusted Performance

Very Weak

Over the last 90 days Victory Integrity Smallmid Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Extreme Networks

Risk-Adjusted Performance

Very Weak

Over the last 90 days Extreme Networks has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest unfluctuating performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Victory Integrity and Extreme Networks

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

The idea behind Victory Integrity Smallmid Cap and Extreme Networks 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.