Correlation Between SPX Corp and Vestas Wind

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

By analyzing existing cross correlation between SPX Corp and Vestas Wind Systems, you can compare the effects of market volatilities on SPX Corp and Vestas Wind 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 SPX Corp with a short position of Vestas Wind. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPX Corp and Vestas Wind.

Diversification Opportunities for SPX Corp and Vestas Wind

-0.52

Correlation Coefficient

SPX Corp  Vestas Wind

Excellent diversification

The 3 months correlation between SPX and Vestas is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding SPX Corp and Vestas Wind Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vestas Wind Systems and SPX Corp 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 SPX Corp are associated (or correlated) with Vestas Wind. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vestas Wind Systems has no effect on the direction of SPX Corp i.e., SPX Corp and Vestas Wind go up and down completely randomly.

Pair Corralation between SPX Corp and Vestas Wind

Given the investment horizon of 90 days SPX Corp is expected to under-perform the Vestas Wind. But the stock apears to be less risky and, when comparing its historical volatility, SPX Corp is 1.23 times less risky than Vestas Wind. The stock trades about -0.04 of its potential returns per unit of risk. The Vestas Wind Systems is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1,380  in Vestas Wind Systems on December 27, 2024 and sell it today you would earn a total of  131.00  from holding Vestas Wind Systems or generate 9.49% return on investment over 90 days.

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

SPX Corp  vs.  Vestas Wind Systems

SPX Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days SPX Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Vestas Wind Systems

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Vestas Wind Systems are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Vestas Wind reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SPX Corp and Vestas Wind

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

The idea behind SPX Corp and Vestas Wind Systems 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.