Correlation Between Vitec Software and Generic Sweden

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

By analyzing existing cross correlation between Vitec Software Group and Generic Sweden publ, you can compare the effects of market volatilities on Vitec Software and Generic Sweden 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 Vitec Software with a short position of Generic Sweden. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vitec Software and Generic Sweden.

Diversification Opportunities for Vitec Software and Generic Sweden

0.63

Correlation Coefficient

Vitec Software  Generic Sweden

Poor diversification

The 3 months correlation between Vitec and Generic is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Vitec Software Group and Generic Sweden publ in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Generic Sweden publ and Vitec Software 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 Vitec Software Group are associated (or correlated) with Generic Sweden. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Generic Sweden publ has no effect on the direction of Vitec Software i.e., Vitec Software and Generic Sweden go up and down completely randomly.

Pair Corralation between Vitec Software and Generic Sweden

Assuming the 90 days trading horizon Vitec Software Group is expected to under-perform the Generic Sweden. In addition to that, Vitec Software is 1.17 times more volatile than Generic Sweden publ. It trades about -0.01 of its total potential returns per unit of risk. Generic Sweden publ is currently generating about 0.09 per unit of volatility. If you would invest  4,650  in Generic Sweden publ on October 13, 2024 and sell it today you would earn a total of  1,070  from holding Generic Sweden publ or generate 23.01% return on investment over 90 days.

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

Vitec Software Group  vs.  Generic Sweden publ

Vitec Software Group

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Vitec Software Group are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Vitec Software may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Generic Sweden publ

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Generic Sweden publ are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Generic Sweden unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Vitec Software and Generic Sweden

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

The idea behind Vitec Software Group and Generic Sweden publ 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.