Correlation Between VMware and PagSeguro Digital

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

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

Diversification Opportunities for VMware and PagSeguro Digital

-0.9

Correlation Coefficient

VMware  PagSeguro Digital

Pay attention - limited upside

The 3 months correlation between VMware and PagSeguro is -0.9. Overlapping area represents the amount of risk that can be diversified away by holding VMware Inc and PagSeguro Digital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PagSeguro Digital 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 PagSeguro Digital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PagSeguro Digital has no effect on the direction of VMware i.e., VMware and PagSeguro Digital go up and down completely randomly.

Pair Corralation between VMware and PagSeguro Digital

Considering the 90-day investment horizon VMware Inc is expected to generate 0.57 times more return on investment than PagSeguro Digital. However, VMware Inc is 1.75 times less risky than PagSeguro Digital. It trades about 0.17 of its potential returns per unit of risk. PagSeguro Digital is currently generating about -0.01 per unit of risk. If you would invest  11,934  in VMware Inc on September 27, 2024 and sell it today you would earn a total of  4,109  from holding VMware Inc or generate 34.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	24.53%
Values	Daily Returns

VMware Inc  vs.  PagSeguro Digital

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.

PagSeguro Digital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PagSeguro Digital has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with VMware and PagSeguro Digital

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

The idea behind VMware Inc and PagSeguro Digital 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.