Correlation Between VGI Public and ATP 30

Can any of the company-specific risk be diversified away by investing in both VGI Public and ATP 30 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 VGI Public and ATP 30 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between VGI Public and ATP 30 Public, you can compare the effects of market volatilities on VGI Public and ATP 30 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 VGI Public with a short position of ATP 30. Check out your portfolio center. Please also check ongoing floating volatility patterns of VGI Public and ATP 30.

Diversification Opportunities for VGI Public and ATP 30

0.68

Correlation Coefficient

VGI Public  ATP 30

Poor diversification

The 3 months correlation between VGI and ATP is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding VGI Public and ATP 30 Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ATP 30 Public and VGI Public 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 VGI Public are associated (or correlated) with ATP 30. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ATP 30 Public has no effect on the direction of VGI Public i.e., VGI Public and ATP 30 go up and down completely randomly.

Pair Corralation between VGI Public and ATP 30

Assuming the 90 days trading horizon VGI Public is expected to generate 52.51 times more return on investment than ATP 30. However, VGI Public is 52.51 times more volatile than ATP 30 Public. It trades about 0.11 of its potential returns per unit of risk. ATP 30 Public is currently generating about 0.09 per unit of risk. If you would invest  286.00  in VGI Public on September 5, 2024 and sell it today you would earn a total of  2.00  from holding VGI Public or generate 0.7% return on investment over 90 days.

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

VGI Public  vs.  ATP 30 Public

VGI Public

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in VGI Public are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental drivers, VGI Public sustained solid returns over the last few months and may actually be approaching a breakup point.

ATP 30 Public

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ATP 30 Public are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental drivers, ATP 30 sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with VGI Public and ATP 30

The main advantage of trading using opposite VGI Public and ATP 30 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VGI Public position performs unexpectedly, ATP 30 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 ATP 30 will offset losses from the drop in ATP 30's long position.

The idea behind VGI Public and ATP 30 Public 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.