Correlation Between VSE and Coda Octopus

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

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

Diversification Opportunities for VSE and Coda Octopus

0.83

Correlation Coefficient

VSE  Coda Octopus

Very poor diversification

The 3 months correlation between VSE and Coda is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding VSE Corp. and Coda Octopus Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coda Octopus Group and VSE 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 VSE Corporation are associated (or correlated) with Coda Octopus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coda Octopus Group has no effect on the direction of VSE i.e., VSE and Coda Octopus go up and down completely randomly.

Pair Corralation between VSE and Coda Octopus

Given the investment horizon of 90 days VSE Corporation is expected to under-perform the Coda Octopus. But the stock apears to be less risky and, when comparing its historical volatility, VSE Corporation is 1.11 times less risky than Coda Octopus. The stock trades about -0.1 of its potential returns per unit of risk. The Coda Octopus Group is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  861.00  in Coda Octopus Group on October 6, 2024 and sell it today you would lose (72.00) from holding Coda Octopus Group or give up 8.36% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	97.62%
Values	Daily Returns

VSE Corp.  vs.  Coda Octopus Group

VSE Corporation

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in VSE Corporation are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, VSE exhibited solid returns over the last few months and may actually be approaching a breakup point.

Coda Octopus Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Coda Octopus Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental indicators, Coda Octopus is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with VSE and Coda Octopus

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

The idea behind VSE Corporation and Coda Octopus Group 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..