Correlation Between Vitec Software and USWE Sports

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

Diversification Opportunities for Vitec Software and USWE Sports

0.52

Correlation Coefficient

Vitec Software  USWE Sports

Very weak diversification

The 3 months correlation between Vitec and USWE is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Vitec Software Group and USWE Sports AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on USWE Sports 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 USWE Sports. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of USWE Sports AB has no effect on the direction of Vitec Software i.e., Vitec Software and USWE Sports go up and down completely randomly.

Pair Corralation between Vitec Software and USWE Sports

Assuming the 90 days trading horizon Vitec Software Group is expected to generate 0.71 times more return on investment than USWE Sports. However, Vitec Software Group is 1.4 times less risky than USWE Sports. It trades about 0.18 of its potential returns per unit of risk. USWE Sports AB is currently generating about 0.05 per unit of risk. If you would invest  50,629  in Vitec Software Group on December 1, 2024 and sell it today you would earn a total of  9,421  from holding Vitec Software Group or generate 18.61% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	96.61%
Values	Daily Returns

Vitec Software Group  vs.  USWE Sports AB

Vitec Software Group

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vitec Software Group are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Vitec Software unveiled solid returns over the last few months and may actually be approaching a breakup point.

USWE Sports AB

Risk-Adjusted Performance

Insignificant

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

Pair Trading with Vitec Software and USWE Sports

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

The idea behind Vitec Software Group and USWE Sports 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.

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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.