Correlation Between VTC Telecommunicatio and Sea Air

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

By analyzing existing cross correlation between VTC Telecommunications JSC and Sea Air Freight, you can compare the effects of market volatilities on VTC Telecommunicatio and Sea Air 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 VTC Telecommunicatio with a short position of Sea Air. Check out your portfolio center. Please also check ongoing floating volatility patterns of VTC Telecommunicatio and Sea Air.

Diversification Opportunities for VTC Telecommunicatio and Sea Air

0.39

Correlation Coefficient

VTC Telecommunicatio  Sea Air

Weak diversification

The 3 months correlation between VTC and Sea is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding VTC Telecommunications JSC and Sea Air Freight in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sea Air Freight and VTC Telecommunicatio 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 VTC Telecommunications JSC are associated (or correlated) with Sea Air. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sea Air Freight has no effect on the direction of VTC Telecommunicatio i.e., VTC Telecommunicatio and Sea Air go up and down completely randomly.

Pair Corralation between VTC Telecommunicatio and Sea Air

Assuming the 90 days trading horizon VTC Telecommunications JSC is expected to under-perform the Sea Air. But the stock apears to be less risky and, when comparing its historical volatility, VTC Telecommunications JSC is 1.03 times less risky than Sea Air. The stock trades about -0.08 of its potential returns per unit of risk. The Sea Air Freight is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  3,100,000  in Sea Air Freight on October 8, 2024 and sell it today you would lose (50,000) from holding Sea Air Freight or give up 1.61% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	94.44%
Values	Daily Returns

VTC Telecommunications JSC  vs.  Sea Air Freight

VTC Telecommunications

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VTC Telecommunications JSC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, VTC Telecommunicatio is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Sea Air Freight

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sea Air Freight has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward indicators, Sea Air is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with VTC Telecommunicatio and Sea Air

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

The idea behind VTC Telecommunications JSC and Sea Air Freight 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.