Correlation Between VivoPower International and VHAI

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

Diversification Opportunities for VivoPower International and VHAI

0.76

Correlation Coefficient

VivoPower International  VHAI

Poor diversification

The 3 months correlation between VivoPower and VHAI is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding VivoPower International PLC and VHAI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VHAI 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 VHAI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VHAI has no effect on the direction of VivoPower International i.e., VivoPower International and VHAI go up and down completely randomly.

Pair Corralation between VivoPower International and VHAI

Given the investment horizon of 90 days VivoPower International PLC is expected to generate 1.87 times more return on investment than VHAI. However, VivoPower International is 1.87 times more volatile than VHAI. It trades about 0.17 of its potential returns per unit of risk. VHAI is currently generating about -0.1 per unit of risk. If you would invest  82.00  in VivoPower International PLC on September 2, 2024 and sell it today you would earn a total of  36.00  from holding VivoPower International PLC or generate 43.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.24%
Values	Daily Returns

VivoPower International PLC  vs.  VHAI

VivoPower International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VivoPower International PLC has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, VivoPower International is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

VHAI

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VHAI has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with VivoPower International and VHAI

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

The idea behind VivoPower International PLC and VHAI 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.