Correlation Between Vela Large and Americafirst Large

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

By analyzing existing cross correlation between Vela Large Cap and Americafirst Large Cap, you can compare the effects of market volatilities on Vela Large and Americafirst Large 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 Vela Large with a short position of Americafirst Large. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vela Large and Americafirst Large.

Diversification Opportunities for Vela Large and Americafirst Large

0.56

Correlation Coefficient

Vela Large  Americafirst Large

Very weak diversification

The 3 months correlation between Vela and Americafirst is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Vela Large Cap and Americafirst Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Americafirst Large Cap and Vela Large 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 Vela Large Cap are associated (or correlated) with Americafirst Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Americafirst Large Cap has no effect on the direction of Vela Large i.e., Vela Large and Americafirst Large go up and down completely randomly.

Pair Corralation between Vela Large and Americafirst Large

Assuming the 90 days horizon Vela Large Cap is expected to generate 0.52 times more return on investment than Americafirst Large. However, Vela Large Cap is 1.91 times less risky than Americafirst Large. It trades about -0.05 of its potential returns per unit of risk. Americafirst Large Cap is currently generating about -0.05 per unit of risk. If you would invest  1,651  in Vela Large Cap on December 30, 2024 and sell it today you would lose (36.00) from holding Vela Large Cap or give up 2.18% of portfolio value over 90 days.

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

Vela Large Cap  vs.  Americafirst Large Cap

Vela Large Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vela Large Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Vela Large is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Americafirst Large Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Americafirst Large Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Americafirst Large is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Vela Large and Americafirst Large

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

The idea behind Vela Large Cap and Americafirst Large Cap 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.