Correlation Between VSE and Great Elm

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

By analyzing existing cross correlation between VSE Corporation and Great Elm Capital, you can compare the effects of market volatilities on VSE and Great Elm 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 Great Elm. Check out your portfolio center. Please also check ongoing floating volatility patterns of VSE and Great Elm.

Diversification Opportunities for VSE and Great Elm

0.21

Correlation Coefficient

VSE  Great Elm

Modest diversification

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

Pair Corralation between VSE and Great Elm

Given the investment horizon of 90 days VSE Corporation is expected to generate 8.84 times more return on investment than Great Elm. However, VSE is 8.84 times more volatile than Great Elm Capital. It trades about 0.09 of its potential returns per unit of risk. Great Elm Capital is currently generating about 0.13 per unit of risk. If you would invest  5,859  in VSE Corporation on October 7, 2024 and sell it today you would earn a total of  3,506  from holding VSE Corporation or generate 59.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.97%
Values	Daily Returns

VSE Corp.  vs.  Great Elm Capital

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.

Great Elm Capital

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Great Elm Capital are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong fundamental indicators, Great Elm is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with VSE and Great Elm

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

The idea behind VSE Corporation and Great Elm Capital 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.