Correlation Between Vestas Wind and BankInvest Optima

Can any of the company-specific risk be diversified away by investing in both Vestas Wind and BankInvest Optima 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 Vestas Wind and BankInvest Optima into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Vestas Wind Systems and BankInvest Optima 10, you can compare the effects of market volatilities on Vestas Wind and BankInvest Optima 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 Vestas Wind with a short position of BankInvest Optima. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vestas Wind and BankInvest Optima.

Diversification Opportunities for Vestas Wind and BankInvest Optima

0.12

Correlation Coefficient

Vestas Wind  BankInvest Optima

Average diversification

The 3 months correlation between Vestas and BankInvest is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Vestas Wind Systems and BankInvest Optima 10 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BankInvest Optima and Vestas Wind 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 Vestas Wind Systems are associated (or correlated) with BankInvest Optima. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BankInvest Optima has no effect on the direction of Vestas Wind i.e., Vestas Wind and BankInvest Optima go up and down completely randomly.

Pair Corralation between Vestas Wind and BankInvest Optima

Assuming the 90 days trading horizon Vestas Wind Systems is expected to generate 10.38 times more return on investment than BankInvest Optima. However, Vestas Wind is 10.38 times more volatile than BankInvest Optima 10. It trades about 0.06 of its potential returns per unit of risk. BankInvest Optima 10 is currently generating about -0.13 per unit of risk. If you would invest  9,828  in Vestas Wind Systems on December 11, 2024 and sell it today you would earn a total of  872.00  from holding Vestas Wind Systems or generate 8.87% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	94.92%
Values	Daily Returns

Vestas Wind Systems  vs.  BankInvest Optima 10

Vestas Wind Systems

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Vestas Wind Systems are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Vestas Wind may actually be approaching a critical reversion point that can send shares even higher in April 2025.

BankInvest Optima

Risk-Adjusted Performance

Very Weak

Over the last 90 days BankInvest Optima 10 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, BankInvest Optima is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Vestas Wind and BankInvest Optima

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

The idea behind Vestas Wind Systems and BankInvest Optima 10 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.