Correlation Between Planet Labs and VSE

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

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

Diversification Opportunities for Planet Labs and VSE

-0.18

Correlation Coefficient

Planet Labs  VSE

Good diversification

The 3 months correlation between Planet and VSE is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Planet Labs PBC and VSE Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VSE Corporation and Planet Labs 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 Planet Labs PBC 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 Planet Labs i.e., Planet Labs and VSE go up and down completely randomly.

Pair Corralation between Planet Labs and VSE

Allowing for the 90-day total investment horizon Planet Labs PBC is expected to under-perform the VSE. In addition to that, Planet Labs is 1.84 times more volatile than VSE Corporation. It trades about -0.01 of its total potential returns per unit of risk. VSE Corporation is currently generating about 0.14 per unit of volatility. If you would invest  9,770  in VSE Corporation on December 26, 2024 and sell it today you would earn a total of  2,759  from holding VSE Corporation or generate 28.24% return on investment over 90 days.

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

Planet Labs PBC  vs.  VSE Corp.

Planet Labs PBC

Risk-Adjusted Performance

Very Weak

Over the last 90 days Planet Labs PBC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent essential indicators, Planet Labs is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

VSE Corporation

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in VSE Corporation are ranked lower than 11 (%) 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 Planet Labs and VSE

The main advantage of trading using opposite Planet Labs and VSE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Planet Labs 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 Planet Labs PBC 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.

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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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.