Correlation Between Inverse Government and Vela International

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

By analyzing existing cross correlation between Inverse Government Long and Vela International, you can compare the effects of market volatilities on Inverse Government and Vela International 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 Inverse Government with a short position of Vela International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Inverse Government and Vela International.

Diversification Opportunities for Inverse Government and Vela International

-0.86

Correlation Coefficient

Inverse Government  Vela International

Pay attention - limited upside

The 3 months correlation between Inverse and Vela is -0.86. Overlapping area represents the amount of risk that can be diversified away by holding Inverse Government Long and Vela International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vela International and Inverse Government 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 Inverse Government Long are associated (or correlated) with Vela International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vela International has no effect on the direction of Inverse Government i.e., Inverse Government and Vela International go up and down completely randomly.

Pair Corralation between Inverse Government and Vela International

Assuming the 90 days horizon Inverse Government Long is expected to generate 1.38 times more return on investment than Vela International. However, Inverse Government is 1.38 times more volatile than Vela International. It trades about 0.06 of its potential returns per unit of risk. Vela International is currently generating about 0.03 per unit of risk. If you would invest  14,121  in Inverse Government Long on October 24, 2024 and sell it today you would earn a total of  4,630  from holding Inverse Government Long or generate 32.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	99.8%
Values	Daily Returns

Inverse Government Long  vs.  Vela International

Inverse Government Long

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Inverse Government Long are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Inverse Government may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Vela International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vela International has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong essential indicators, Vela International is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Inverse Government and Vela International

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

The idea behind Inverse Government Long and Vela International 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.