Correlation Between Virgin Galactic and Eve Holding

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

By analyzing existing cross correlation between Virgin Galactic Holdings and Eve Holding, you can compare the effects of market volatilities on Virgin Galactic and Eve Holding 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 Virgin Galactic with a short position of Eve Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of Virgin Galactic and Eve Holding.

Diversification Opportunities for Virgin Galactic and Eve Holding

-0.22

Correlation Coefficient

Virgin Galactic  Eve Holding

Very good diversification

The 3 months correlation between Virgin and Eve is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Virgin Galactic Holdings and Eve Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eve Holding and Virgin Galactic 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 Virgin Galactic Holdings are associated (or correlated) with Eve Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eve Holding has no effect on the direction of Virgin Galactic i.e., Virgin Galactic and Eve Holding go up and down completely randomly.

Pair Corralation between Virgin Galactic and Eve Holding

Given the investment horizon of 90 days Virgin Galactic Holdings is expected to under-perform the Eve Holding. But the stock apears to be less risky and, when comparing its historical volatility, Virgin Galactic Holdings is 1.33 times less risky than Eve Holding. The stock trades about -0.27 of its potential returns per unit of risk. The Eve Holding is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  419.00  in Eve Holding on November 28, 2024 and sell it today you would lose (4.00) from holding Eve Holding or give up 0.95% of portfolio value over 90 days.

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

Virgin Galactic Holdings  vs.  Eve Holding

Virgin Galactic Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Virgin Galactic Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in March 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Eve Holding

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Eve Holding are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong technical and fundamental indicators, Eve Holding is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Virgin Galactic and Eve Holding

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

The idea behind Virgin Galactic Holdings and Eve Holding 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.