Correlation Between VivoPower International and Basic Materials

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

Diversification Opportunities for VivoPower International and Basic Materials

-0.53

Correlation Coefficient

VivoPower International  Basic Materials

Excellent diversification

The 3 months correlation between VivoPower and Basic is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding VivoPower International PLC and Basic Materials Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Basic Materials 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 Basic Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Basic Materials has no effect on the direction of VivoPower International i.e., VivoPower International and Basic Materials go up and down completely randomly.

Pair Corralation between VivoPower International and Basic Materials

Given the investment horizon of 90 days VivoPower International PLC is expected to generate 1.18 times more return on investment than Basic Materials. However, VivoPower International is 1.18 times more volatile than Basic Materials Fund. It trades about 0.18 of its potential returns per unit of risk. Basic Materials Fund is currently generating about -0.15 per unit of risk. If you would invest  121.00  in VivoPower International PLC on October 11, 2024 and sell it today you would earn a total of  27.00  from holding VivoPower International PLC or generate 22.31% return on investment over 90 days.

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

VivoPower International PLC  vs.  Basic Materials Fund

VivoPower International

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in VivoPower International PLC are ranked lower than 10 (%) 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.

Basic Materials

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Basic Materials Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with VivoPower International and Basic Materials

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

The idea behind VivoPower International PLC and Basic Materials Fund 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.