Correlation Between VMware and Edgio

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

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

Diversification Opportunities for VMware and Edgio

-0.51

Correlation Coefficient

VMware  Edgio

Excellent diversification

The 3 months correlation between VMware and Edgio is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding VMware Inc and Edgio Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Edgio Inc and VMware 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 VMware Inc are associated (or correlated) with Edgio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Edgio Inc has no effect on the direction of VMware i.e., VMware and Edgio go up and down completely randomly.

Pair Corralation between VMware and Edgio

If you would invest  2.00  in Edgio Inc on October 6, 2024 and sell it today you would earn a total of  0.00  from holding Edgio Inc or generate 0.0% return on investment over 90 days.

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

VMware Inc  vs.  Edgio Inc

VMware Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VMware Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable primary indicators, VMware is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Edgio Inc

Risk-Adjusted Performance

0 of 100

Solid

Over the last 90 days Edgio Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very weak forward indicators, Edgio displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with VMware and Edgio

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

The idea behind VMware Inc and Edgio Inc 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 CEOs Directory module to screen CEOs from public companies around the world.