Correlation Between Vitec Software and Peab AB

Can any of the company-specific risk be diversified away by investing in both Vitec Software and Peab AB 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 Peab AB 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 Peab AB, you can compare the effects of market volatilities on Vitec Software and Peab AB 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 Peab AB. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vitec Software and Peab AB.

Diversification Opportunities for Vitec Software and Peab AB

0.92

Correlation Coefficient

Vitec Software  Peab AB

Almost no diversification

The 3 months correlation between Vitec and Peab is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Vitec Software Group and Peab AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Peab AB 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 Peab AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Peab AB has no effect on the direction of Vitec Software i.e., Vitec Software and Peab AB go up and down completely randomly.

Pair Corralation between Vitec Software and Peab AB

Assuming the 90 days trading horizon Vitec Software is expected to generate 5.71 times less return on investment than Peab AB. But when comparing it to its historical volatility, Vitec Software Group is 1.0 times less risky than Peab AB. It trades about 0.01 of its potential returns per unit of risk. Peab AB is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  4,901  in Peab AB on December 28, 2024 and sell it today you would earn a total of  2,924  from holding Peab AB or generate 59.66% return on investment over 90 days.

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

Vitec Software Group  vs.  Peab AB

Vitec Software Group

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Vitec Software Group are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Vitec Software is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Peab AB

Risk-Adjusted Performance

Weak

Over the last 90 days Peab AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Peab AB is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Vitec Software and Peab AB

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

The idea behind Vitec Software Group and Peab AB 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.