Correlation Between VGI Public and Eastern Star

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

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

Diversification Opportunities for VGI Public and Eastern Star

-0.03

Correlation Coefficient

VGI Public  Eastern Star

Good diversification

The 3 months correlation between VGI and Eastern is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding VGI Public and Eastern Star Real in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eastern Star Real 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 Eastern Star. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eastern Star Real has no effect on the direction of VGI Public i.e., VGI Public and Eastern Star go up and down completely randomly.

Pair Corralation between VGI Public and Eastern Star

Assuming the 90 days trading horizon VGI Public is expected to generate 1.0 times more return on investment than Eastern Star. However, VGI Public is 1.0 times more volatile than Eastern Star Real. It trades about 0.04 of its potential returns per unit of risk. Eastern Star Real is currently generating about 0.04 per unit of risk. If you would invest  404.00  in VGI Public on September 13, 2024 and sell it today you would lose (124.00) from holding VGI Public or give up 30.69% 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.  Eastern Star Real

VGI Public

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days VGI Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward indicators, VGI Public is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Eastern Star Real

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with VGI Public and Eastern Star

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

The idea behind VGI Public and Eastern Star Real 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 Global Correlations module to find global opportunities by holding instruments from different markets.