Correlation Between Vitec Software and Sectra AB

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

Diversification Opportunities for Vitec Software and Sectra AB

-0.65

Correlation Coefficient

Vitec Software  Sectra AB

Excellent diversification

The 3 months correlation between Vitec and Sectra is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Vitec Software Group and Sectra AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sectra 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 Sectra AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sectra AB has no effect on the direction of Vitec Software i.e., Vitec Software and Sectra AB go up and down completely randomly.

Pair Corralation between Vitec Software and Sectra AB

Assuming the 90 days trading horizon Vitec Software Group is expected to under-perform the Sectra AB. In addition to that, Vitec Software is 1.5 times more volatile than Sectra AB. It trades about -0.05 of its total potential returns per unit of risk. Sectra AB is currently generating about 0.19 per unit of volatility. If you would invest  23,403  in Sectra AB on September 2, 2024 and sell it today you would earn a total of  5,067  from holding Sectra AB or generate 21.65% return on investment over 90 days.

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

Vitec Software Group  vs.  Sectra AB

Vitec Software Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vitec Software Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Sectra AB

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sectra AB are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental indicators, Sectra AB sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Vitec Software and Sectra AB

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

The idea behind Vitec Software Group and Sectra 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.