Correlation Between VGI Public and Dental Public

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

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

Diversification Opportunities for VGI Public and Dental Public

-0.1

Correlation Coefficient

VGI Public  Dental Public

Good diversification

The 3 months correlation between VGI and Dental is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding VGI Public and Dental Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dental 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 Dental Public. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dental Public has no effect on the direction of VGI Public i.e., VGI Public and Dental Public go up and down completely randomly.

Pair Corralation between VGI Public and Dental Public

Assuming the 90 days trading horizon VGI Public is expected to generate 79.2 times more return on investment than Dental Public. However, VGI Public is 79.2 times more volatile than Dental Public. It trades about 0.11 of its potential returns per unit of risk. Dental Public is currently generating about -0.07 per unit of risk. If you would invest  286.00  in VGI Public on September 12, 2024 and sell it today you would lose (6.00) from holding VGI Public or give up 2.1% of portfolio value over 90 days.

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

VGI Public  vs.  Dental 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.

Dental Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dental Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's fundamental drivers remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with VGI Public and Dental Public

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

The idea behind VGI Public and Dental 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 Stocks Directory module to find actively traded stocks across global markets.