Correlation Between Vestas Wind and FOM Technologies

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

Diversification Opportunities for Vestas Wind and FOM Technologies

-0.24

Correlation Coefficient

Vestas Wind  FOM Technologies

Very good diversification

The 3 months correlation between Vestas and FOM is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Vestas Wind Systems and FOM Technologies AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FOM Technologies 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 FOM Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FOM Technologies has no effect on the direction of Vestas Wind i.e., Vestas Wind and FOM Technologies go up and down completely randomly.

Pair Corralation between Vestas Wind and FOM Technologies

Assuming the 90 days trading horizon Vestas Wind is expected to generate 1.16 times less return on investment than FOM Technologies. But when comparing it to its historical volatility, Vestas Wind Systems is 1.52 times less risky than FOM Technologies. It trades about 0.03 of its potential returns per unit of risk. FOM Technologies AS is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  824.00  in FOM Technologies AS on December 29, 2024 and sell it today you would lose (6.00) from holding FOM Technologies AS or give up 0.73% of portfolio value over 90 days.

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

Vestas Wind Systems  vs.  FOM Technologies AS

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 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Vestas Wind is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

FOM Technologies

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in FOM Technologies AS are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy primary indicators, FOM Technologies is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Vestas Wind and FOM Technologies

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

The idea behind Vestas Wind Systems and FOM Technologies AS 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 CEOs Directory module to screen CEOs from public companies around the world.