Correlation Between Vail Resorts and EDP Renovveis

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

By analyzing existing cross correlation between Vail Resorts and EDP Renovveis SA, you can compare the effects of market volatilities on Vail Resorts and EDP Renovveis 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 Vail Resorts with a short position of EDP Renovveis. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vail Resorts and EDP Renovveis.

Diversification Opportunities for Vail Resorts and EDP Renovveis

-0.73

Correlation Coefficient

Vail Resorts  EDP Renovveis

Pay attention - limited upside

The 3 months correlation between Vail and EDP is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Vail Resorts and EDP Renovveis SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EDP Renovveis SA and Vail Resorts 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 Vail Resorts are associated (or correlated) with EDP Renovveis. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EDP Renovveis SA has no effect on the direction of Vail Resorts i.e., Vail Resorts and EDP Renovveis go up and down completely randomly.

Pair Corralation between Vail Resorts and EDP Renovveis

Assuming the 90 days horizon Vail Resorts is expected to generate 1.09 times more return on investment than EDP Renovveis. However, Vail Resorts is 1.09 times more volatile than EDP Renovveis SA. It trades about 0.11 of its potential returns per unit of risk. EDP Renovveis SA is currently generating about -0.25 per unit of risk. If you would invest  16,500  in Vail Resorts on September 22, 2024 and sell it today you would earn a total of  800.00  from holding Vail Resorts or generate 4.85% return on investment over 90 days.

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

Vail Resorts  vs.  EDP Renovveis SA

Vail Resorts

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Vail Resorts are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Vail Resorts may actually be approaching a critical reversion point that can send shares even higher in January 2025.

EDP Renovveis SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EDP Renovveis SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Vail Resorts and EDP Renovveis

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

The idea behind Vail Resorts and EDP Renovveis SA 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.