Correlation Between VP Bank and Schweiter Technologies

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

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

Diversification Opportunities for VP Bank and Schweiter Technologies

-0.21

Correlation Coefficient

VP Bank  Schweiter Technologies

Very good diversification

The 3 months correlation between VPBN and Schweiter is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding VP Bank AG and Schweiter Technologies AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Schweiter Technologies and VP Bank 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 VP Bank AG are associated (or correlated) with Schweiter Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Schweiter Technologies has no effect on the direction of VP Bank i.e., VP Bank and Schweiter Technologies go up and down completely randomly.

Pair Corralation between VP Bank and Schweiter Technologies

Assuming the 90 days trading horizon VP Bank AG is expected to generate 0.71 times more return on investment than Schweiter Technologies. However, VP Bank AG is 1.41 times less risky than Schweiter Technologies. It trades about -0.01 of its potential returns per unit of risk. Schweiter Technologies AG is currently generating about -0.06 per unit of risk. If you would invest  8,454  in VP Bank AG on September 28, 2024 and sell it today you would lose (734.00) from holding VP Bank AG or give up 8.68% of portfolio value over 90 days.

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

VP Bank AG  vs.  Schweiter Technologies AG

VP Bank AG

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in VP Bank AG are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, VP Bank may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Schweiter Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with VP Bank and Schweiter Technologies

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

The idea behind VP Bank AG and Schweiter Technologies AG 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.