Correlation Between Vestas Wind and Nuscale Power

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

Diversification Opportunities for Vestas Wind and Nuscale Power

-0.93

Correlation Coefficient

Vestas Wind  Nuscale Power

Pay attention - limited upside

The 3 months correlation between Vestas and Nuscale is -0.93. Overlapping area represents the amount of risk that can be diversified away by holding Vestas Wind Systems and Nuscale Power Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nuscale Power Corp 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 Nuscale Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nuscale Power Corp has no effect on the direction of Vestas Wind i.e., Vestas Wind and Nuscale Power go up and down completely randomly.

Pair Corralation between Vestas Wind and Nuscale Power

Assuming the 90 days horizon Vestas Wind Systems is expected to under-perform the Nuscale Power. But the pink sheet apears to be less risky and, when comparing its historical volatility, Vestas Wind Systems is 2.74 times less risky than Nuscale Power. The pink sheet trades about -0.04 of its potential returns per unit of risk. The Nuscale Power Corp is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1,089  in Nuscale Power Corp on September 2, 2024 and sell it today you would earn a total of  1,876  from holding Nuscale Power Corp or generate 172.27% return on investment over 90 days.

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

Vestas Wind Systems  vs.  Nuscale Power Corp

Vestas Wind Systems

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vestas Wind Systems has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Nuscale Power Corp

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Nuscale Power Corp are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent primary indicators, Nuscale Power reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Vestas Wind and Nuscale Power

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

The idea behind Vestas Wind Systems and Nuscale Power Corp 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 Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.