Correlation Between MARKET VECTR and VIVA WINE

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

By analyzing existing cross correlation between MARKET VECTR RETAIL and VIVA WINE GROUP, you can compare the effects of market volatilities on MARKET VECTR and VIVA WINE 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 MARKET VECTR with a short position of VIVA WINE. Check out your portfolio center. Please also check ongoing floating volatility patterns of MARKET VECTR and VIVA WINE.

Diversification Opportunities for MARKET VECTR and VIVA WINE

-0.58

Correlation Coefficient

MARKET VECTR  VIVA WINE

Excellent diversification

The 3 months correlation between MARKET and VIVA is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding MARKET VECTR RETAIL and VIVA WINE GROUP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VIVA WINE GROUP and MARKET VECTR 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 MARKET VECTR RETAIL are associated (or correlated) with VIVA WINE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VIVA WINE GROUP has no effect on the direction of MARKET VECTR i.e., MARKET VECTR and VIVA WINE go up and down completely randomly.

Pair Corralation between MARKET VECTR and VIVA WINE

Assuming the 90 days trading horizon MARKET VECTR RETAIL is expected to under-perform the VIVA WINE. But the stock apears to be less risky and, when comparing its historical volatility, MARKET VECTR RETAIL is 1.98 times less risky than VIVA WINE. The stock trades about -0.11 of its potential returns per unit of risk. The VIVA WINE GROUP is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  324.00  in VIVA WINE GROUP on December 21, 2024 and sell it today you would earn a total of  42.00  from holding VIVA WINE GROUP or generate 12.96% return on investment over 90 days.

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

MARKET VECTR RETAIL  vs.  VIVA WINE GROUP

MARKET VECTR RETAIL

Risk-Adjusted Performance

Very Weak

Over the last 90 days MARKET VECTR RETAIL has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, MARKET VECTR is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

VIVA WINE GROUP

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in VIVA WINE GROUP are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, VIVA WINE reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with MARKET VECTR and VIVA WINE

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

The idea behind MARKET VECTR RETAIL and VIVA WINE 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.