Correlation Between VTEX and MicroStrategy Incorporated

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

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

Diversification Opportunities for VTEX and MicroStrategy Incorporated

0.64

Correlation Coefficient

VTEX  MicroStrategy Incorporated

Poor diversification

The 3 months correlation between VTEX and MicroStrategy is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding VTEX and MicroStrategy Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MicroStrategy Incorporated and VTEX 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 VTEX are associated (or correlated) with MicroStrategy Incorporated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MicroStrategy Incorporated has no effect on the direction of VTEX i.e., VTEX and MicroStrategy Incorporated go up and down completely randomly.

Pair Corralation between VTEX and MicroStrategy Incorporated

Given the investment horizon of 90 days VTEX is expected to under-perform the MicroStrategy Incorporated. But the stock apears to be less risky and, when comparing its historical volatility, VTEX is 1.53 times less risky than MicroStrategy Incorporated. The stock trades about -0.03 of its potential returns per unit of risk. The MicroStrategy Incorporated is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  30,296  in MicroStrategy Incorporated on December 30, 2024 and sell it today you would lose (1,355) from holding MicroStrategy Incorporated or give up 4.47% of portfolio value over 90 days.

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

VTEX  vs.  MicroStrategy Incorporated

VTEX

Risk-Adjusted Performance

Very Weak

Over the last 90 days VTEX has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

MicroStrategy Incorporated

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in MicroStrategy Incorporated are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting basic indicators, MicroStrategy Incorporated may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with VTEX and MicroStrategy Incorporated

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

The idea behind VTEX and MicroStrategy Incorporated 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.