Correlation Between Via Renewables and WM Technology

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

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

Diversification Opportunities for Via Renewables and WM Technology

0.54

Correlation Coefficient

Via Renewables  WM Technology

Very weak diversification

The 3 months correlation between Via and MAPSW is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Via Renewables and WM Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WM Technology and Via Renewables 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 Via Renewables are associated (or correlated) with WM Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WM Technology has no effect on the direction of Via Renewables i.e., Via Renewables and WM Technology go up and down completely randomly.

Pair Corralation between Via Renewables and WM Technology

Assuming the 90 days horizon Via Renewables is expected to generate 5.76 times less return on investment than WM Technology. But when comparing it to its historical volatility, Via Renewables is 6.86 times less risky than WM Technology. It trades about 0.07 of its potential returns per unit of risk. WM Technology is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  5.99  in WM Technology on October 1, 2024 and sell it today you would lose (3.06) from holding WM Technology or give up 51.09% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.96%
Values	Daily Returns

Via Renewables  vs.  WM Technology

Via Renewables

Risk-Adjusted Performance

24 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Via Renewables are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Via Renewables reported solid returns over the last few months and may actually be approaching a breakup point.

WM Technology

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in WM Technology are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, WM Technology showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Via Renewables and WM Technology

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

The idea behind Via Renewables and WM Technology 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.

Check out your portfolio center.

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.