Correlation Between Vident International and Vident Core

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

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

Diversification Opportunities for Vident International and Vident Core

-0.04

Correlation Coefficient

Vident International  Vident Core

Good diversification

The 3 months correlation between Vident and Vident is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Vident International Equity and Vident Core Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vident Core Equity and Vident International 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 Vident International Equity are associated (or correlated) with Vident Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vident Core Equity has no effect on the direction of Vident International i.e., Vident International and Vident Core go up and down completely randomly.

Pair Corralation between Vident International and Vident Core

Given the investment horizon of 90 days Vident International is expected to generate 4.0 times less return on investment than Vident Core. In addition to that, Vident International is 1.28 times more volatile than Vident Core Equity. It trades about 0.04 of its total potential returns per unit of risk. Vident Core Equity is currently generating about 0.19 per unit of volatility. If you would invest  5,608  in Vident Core Equity on September 14, 2024 and sell it today you would earn a total of  528.00  from holding Vident Core Equity or generate 9.42% return on investment over 90 days.

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

Vident International Equity  vs.  Vident Core Equity

Vident International

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Vident International Equity are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong fundamental indicators, Vident International is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Vident Core Equity

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vident Core Equity are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent basic indicators, Vident Core may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Vident International and Vident Core

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

The idea behind Vident International Equity and Vident Core Equity 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.