Correlation Between VivoPower International and Specialized Technology

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

Diversification Opportunities for VivoPower International and Specialized Technology

-0.11

Correlation Coefficient

VivoPower International  Specialized Technology

Good diversification

The 3 months correlation between VivoPower and Specialized is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding VivoPower International PLC and Specialized Technology Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Specialized Technology 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 Specialized Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Specialized Technology has no effect on the direction of VivoPower International i.e., VivoPower International and Specialized Technology go up and down completely randomly.

Pair Corralation between VivoPower International and Specialized Technology

Given the investment horizon of 90 days VivoPower International PLC is expected to generate 6.07 times more return on investment than Specialized Technology. However, VivoPower International is 6.07 times more volatile than Specialized Technology Fund. It trades about 0.04 of its potential returns per unit of risk. Specialized Technology Fund is currently generating about -0.18 per unit of risk. If you would invest  135.00  in VivoPower International PLC on September 15, 2024 and sell it today you would lose (10.00) from holding VivoPower International PLC or give up 7.41% of portfolio value over 90 days.

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

VivoPower International PLC  vs.  Specialized Technology Fund

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 weak basic indicators, VivoPower International may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Specialized Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Specialized Technology Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Specialized Technology is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with VivoPower International and Specialized Technology

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

The idea behind VivoPower International PLC and Specialized Technology 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .