Correlation Between Vetoquinol and Verallia

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

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

Diversification Opportunities for Vetoquinol and Verallia

-0.3

Correlation Coefficient

Vetoquinol  Verallia

Very good diversification

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

Pair Corralation between Vetoquinol and Verallia

Assuming the 90 days trading horizon Vetoquinol is expected to under-perform the Verallia. But the stock apears to be less risky and, when comparing its historical volatility, Vetoquinol is 1.33 times less risky than Verallia. The stock trades about -0.06 of its potential returns per unit of risk. The Verallia is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  2,434  in Verallia on December 2, 2024 and sell it today you would earn a total of  248.00  from holding Verallia or generate 10.19% return on investment over 90 days.

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

Vetoquinol  vs.  Verallia

Vetoquinol

Risk-Adjusted Performance

Very Weak

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

Verallia

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Verallia are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Verallia may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Vetoquinol and Verallia

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

The idea behind Vetoquinol and Verallia 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.