Correlation Between PROVIDENCE and Virgin Group

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

By analyzing existing cross correlation between PROVIDENCE HEALTH SVCS and Virgin Group Acquisition, you can compare the effects of market volatilities on PROVIDENCE and Virgin Group 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 PROVIDENCE with a short position of Virgin Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of PROVIDENCE and Virgin Group.

Diversification Opportunities for PROVIDENCE and Virgin Group

0.05

Correlation Coefficient

PROVIDENCE  Virgin Group

Significant diversification

The 3 months correlation between PROVIDENCE and Virgin is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding PROVIDENCE HEALTH SVCS and Virgin Group Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Virgin Group Acquisition and PROVIDENCE 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 PROVIDENCE HEALTH SVCS are associated (or correlated) with Virgin Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Virgin Group Acquisition has no effect on the direction of PROVIDENCE i.e., PROVIDENCE and Virgin Group go up and down completely randomly.

Pair Corralation between PROVIDENCE and Virgin Group

Assuming the 90 days trading horizon PROVIDENCE HEALTH SVCS is expected to under-perform the Virgin Group. But the bond apears to be less risky and, when comparing its historical volatility, PROVIDENCE HEALTH SVCS is 2.59 times less risky than Virgin Group. The bond trades about -0.71 of its potential returns per unit of risk. The Virgin Group Acquisition is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  160.00  in Virgin Group Acquisition on December 26, 2024 and sell it today you would lose (4.00) from holding Virgin Group Acquisition or give up 2.5% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	9.09%
Values	Daily Returns

PROVIDENCE HEALTH SVCS  vs.  Virgin Group Acquisition

PROVIDENCE HEALTH SVCS

Risk-Adjusted Performance

Modest

Over the last 90 days PROVIDENCE HEALTH SVCS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, PROVIDENCE is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Virgin Group Acquisition

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Virgin Group Acquisition are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Virgin Group showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PROVIDENCE and Virgin Group

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

The idea behind PROVIDENCE HEALTH SVCS and Virgin Group Acquisition 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.