Correlation Between VARNO and US Global

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

By analyzing existing cross correlation between VARNO 8 15 NOV 32 and US Global Investors, you can compare the effects of market volatilities on VARNO and US Global 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 VARNO with a short position of US Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of VARNO and US Global.

Diversification Opportunities for VARNO and US Global

-0.3

Correlation Coefficient

VARNO  US Global

Very good diversification

The 3 months correlation between VARNO and GROW is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding VARNO 8 15 NOV 32 and US Global Investors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Global Investors and VARNO 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 VARNO 8 15 NOV 32 are associated (or correlated) with US Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US Global Investors has no effect on the direction of VARNO i.e., VARNO and US Global go up and down completely randomly.

Pair Corralation between VARNO and US Global

Assuming the 90 days trading horizon VARNO 8 15 NOV 32 is expected to generate 0.83 times more return on investment than US Global. However, VARNO 8 15 NOV 32 is 1.2 times less risky than US Global. It trades about -0.08 of its potential returns per unit of risk. US Global Investors is currently generating about -0.19 per unit of risk. If you would invest  11,237  in VARNO 8 15 NOV 32 on December 4, 2024 and sell it today you would lose (76.00) from holding VARNO 8 15 NOV 32 or give up 0.68% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	65.0%
Values	Daily Returns

VARNO 8 15 NOV 32  vs.  US Global Investors

VARNO 8 15

Risk-Adjusted Performance

Very Weak

Over the last 90 days VARNO 8 15 NOV 32 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, VARNO is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

US Global Investors

Risk-Adjusted Performance

Very Weak

Over the last 90 days US Global Investors has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, US Global is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with VARNO and US Global

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

The idea behind VARNO 8 15 NOV 32 and US Global Investors 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.