Correlation Between VivoPower International and ABCO Energy

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

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

Diversification Opportunities for VivoPower International and ABCO Energy

0.0

Correlation Coefficient

VivoPower International  ABCO Energy

Pay attention - limited upside

The 3 months correlation between VivoPower and ABCO is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding VivoPower International PLC and ABCO Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ABCO Energy and VivoPower International 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 VivoPower International PLC are associated (or correlated) with ABCO Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ABCO Energy has no effect on the direction of VivoPower International i.e., VivoPower International and ABCO Energy go up and down completely randomly.

Pair Corralation between VivoPower International and ABCO Energy

Given the investment horizon of 90 days VivoPower International is expected to generate 48.93 times less return on investment than ABCO Energy. But when comparing it to its historical volatility, VivoPower International PLC is 9.72 times less risky than ABCO Energy. It trades about 0.02 of its potential returns per unit of risk. ABCO Energy is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  0.01  in ABCO Energy on September 5, 2024 and sell it today you would earn a total of  0.00  from holding ABCO Energy or generate 0.0% return on investment over 90 days.

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

VivoPower International PLC  vs.  ABCO Energy

VivoPower International

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in VivoPower International PLC are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, VivoPower International reported solid returns over the last few months and may actually be approaching a breakup point.

ABCO Energy

Risk-Adjusted Performance

8 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ABCO Energy are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile fundamental indicators, ABCO Energy exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with VivoPower International and ABCO Energy

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

The idea behind VivoPower International PLC and ABCO Energy 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.