Correlation Between Taiga Building and Vertical Aerospace

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

By analyzing existing cross correlation between Taiga Building Products and Vertical Aerospace, you can compare the effects of market volatilities on Taiga Building and Vertical Aerospace 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 Taiga Building with a short position of Vertical Aerospace. Check out your portfolio center. Please also check ongoing floating volatility patterns of Taiga Building and Vertical Aerospace.

Diversification Opportunities for Taiga Building and Vertical Aerospace

-0.2

Correlation Coefficient

Taiga Building  Vertical Aerospace

Good diversification

The 3 months correlation between Taiga and Vertical is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Taiga Building Products and Vertical Aerospace in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vertical Aerospace and Taiga Building 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 Taiga Building Products are associated (or correlated) with Vertical Aerospace. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vertical Aerospace has no effect on the direction of Taiga Building i.e., Taiga Building and Vertical Aerospace go up and down completely randomly.

Pair Corralation between Taiga Building and Vertical Aerospace

Assuming the 90 days horizon Taiga Building is expected to generate 14.17 times less return on investment than Vertical Aerospace. But when comparing it to its historical volatility, Taiga Building Products is 6.56 times less risky than Vertical Aerospace. It trades about 0.06 of its potential returns per unit of risk. Vertical Aerospace is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  767.00  in Vertical Aerospace on October 11, 2024 and sell it today you would earn a total of  184.00  from holding Vertical Aerospace or generate 23.99% return on investment over 90 days.

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

Taiga Building Products  vs.  Vertical Aerospace

Taiga Building Products

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Taiga Building Products has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Taiga Building is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Vertical Aerospace

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vertical Aerospace are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Vertical Aerospace disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Taiga Building and Vertical Aerospace

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

The idea behind Taiga Building Products and Vertical Aerospace 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.