Correlation Between AS Latvijas and Vienna Insurance

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

By analyzing existing cross correlation between AS Latvijas balzams and Vienna Insurance Group, you can compare the effects of market volatilities on AS Latvijas and Vienna Insurance 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 AS Latvijas with a short position of Vienna Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of AS Latvijas and Vienna Insurance.

Diversification Opportunities for AS Latvijas and Vienna Insurance

-0.33

Correlation Coefficient

AS Latvijas  Vienna Insurance

Very good diversification

The 3 months correlation between UM9 and Vienna is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding AS Latvijas balzams and Vienna Insurance Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vienna Insurance and AS Latvijas 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 AS Latvijas balzams are associated (or correlated) with Vienna Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vienna Insurance has no effect on the direction of AS Latvijas i.e., AS Latvijas and Vienna Insurance go up and down completely randomly.

Pair Corralation between AS Latvijas and Vienna Insurance

Assuming the 90 days trading horizon AS Latvijas balzams is expected to under-perform the Vienna Insurance. But the stock apears to be less risky and, when comparing its historical volatility, AS Latvijas balzams is 1.97 times less risky than Vienna Insurance. The stock trades about -0.38 of its potential returns per unit of risk. The Vienna Insurance Group is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest  2,915  in Vienna Insurance Group on October 5, 2024 and sell it today you would earn a total of  125.00  from holding Vienna Insurance Group or generate 4.29% return on investment over 90 days.

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

AS Latvijas balzams  vs.  Vienna Insurance Group

AS Latvijas balzams

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AS Latvijas balzams has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, AS Latvijas is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Vienna Insurance

Risk-Adjusted Performance

0 of 100

Modest

Over the last 90 days Vienna Insurance Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Vienna Insurance is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with AS Latvijas and Vienna Insurance

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

The idea behind AS Latvijas balzams and Vienna Insurance Group 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.