Correlation Between VivoPower International and FTC Solar

Can any of the company-specific risk be diversified away by investing in both VivoPower International and FTC Solar 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 FTC Solar 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 FTC Solar, you can compare the effects of market volatilities on VivoPower International and FTC Solar 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 FTC Solar. Check out your portfolio center. Please also check ongoing floating volatility patterns of VivoPower International and FTC Solar.

Diversification Opportunities for VivoPower International and FTC Solar

-0.63

Correlation Coefficient

VivoPower International  FTC Solar

Excellent diversification

The 3 months correlation between VivoPower and FTC is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding VivoPower International PLC and FTC Solar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FTC Solar 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 FTC Solar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FTC Solar has no effect on the direction of VivoPower International i.e., VivoPower International and FTC Solar go up and down completely randomly.

Pair Corralation between VivoPower International and FTC Solar

Given the investment horizon of 90 days VivoPower International is expected to generate 4.69 times less return on investment than FTC Solar. But when comparing it to its historical volatility, VivoPower International PLC is 1.18 times less risky than FTC Solar. It trades about 0.02 of its potential returns per unit of risk. FTC Solar is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  217.00  in FTC Solar on September 5, 2024 and sell it today you would earn a total of  86.00  from holding FTC Solar or generate 39.63% return on investment over 90 days.

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

VivoPower International PLC  vs.  FTC Solar

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.

FTC Solar

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in FTC Solar are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak fundamental indicators, FTC Solar demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with VivoPower International and FTC Solar

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

The idea behind VivoPower International PLC and FTC Solar 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.