Correlation Between WBI Power and Vesper Large

Can any of the company-specific risk be diversified away by investing in both WBI Power and Vesper Large 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 WBI Power and Vesper Large into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between WBI Power Factor and Vesper Large Cap, you can compare the effects of market volatilities on WBI Power and Vesper Large 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 WBI Power with a short position of Vesper Large. Check out your portfolio center. Please also check ongoing floating volatility patterns of WBI Power and Vesper Large.

Diversification Opportunities for WBI Power and Vesper Large

0.89

Correlation Coefficient

WBI Power  Vesper Large

Very poor diversification

The 3 months correlation between WBI and Vesper is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding WBI Power Factor and Vesper Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vesper Large Cap and WBI Power 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 WBI Power Factor are associated (or correlated) with Vesper Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vesper Large Cap has no effect on the direction of WBI Power i.e., WBI Power and Vesper Large go up and down completely randomly.

Pair Corralation between WBI Power and Vesper Large

Given the investment horizon of 90 days WBI Power Factor is expected to under-perform the Vesper Large. In addition to that, WBI Power is 1.05 times more volatile than Vesper Large Cap. It trades about -0.1 of its total potential returns per unit of risk. Vesper Large Cap is currently generating about -0.09 per unit of volatility. If you would invest  3,216  in Vesper Large Cap on December 2, 2024 and sell it today you would lose (144.00) from holding Vesper Large Cap or give up 4.48% of portfolio value over 90 days.

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

WBI Power Factor  vs.  Vesper Large Cap

WBI Power Factor

Risk-Adjusted Performance

Very Weak

Over the last 90 days WBI Power Factor has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong forward indicators, WBI Power is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Vesper Large Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vesper Large Cap has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Vesper Large is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with WBI Power and Vesper Large

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

The idea behind WBI Power Factor and Vesper Large Cap 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.