Correlation Between IM Vinaria and Safetech Innovations

Can any of the company-specific risk be diversified away by investing in both IM Vinaria and Safetech Innovations 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 IM Vinaria and Safetech Innovations into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between IM Vinaria Purcari and Safetech Innovations SA, you can compare the effects of market volatilities on IM Vinaria and Safetech Innovations 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 IM Vinaria with a short position of Safetech Innovations. Check out your portfolio center. Please also check ongoing floating volatility patterns of IM Vinaria and Safetech Innovations.

Diversification Opportunities for IM Vinaria and Safetech Innovations

0.5

Correlation Coefficient

IM Vinaria  Safetech Innovations

Very weak diversification

The 3 months correlation between WINE and Safetech is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding IM Vinaria Purcari and Safetech Innovations SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Safetech Innovations and IM Vinaria 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 IM Vinaria Purcari are associated (or correlated) with Safetech Innovations. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Safetech Innovations has no effect on the direction of IM Vinaria i.e., IM Vinaria and Safetech Innovations go up and down completely randomly.

Pair Corralation between IM Vinaria and Safetech Innovations

Assuming the 90 days trading horizon IM Vinaria Purcari is expected to generate 0.92 times more return on investment than Safetech Innovations. However, IM Vinaria Purcari is 1.08 times less risky than Safetech Innovations. It trades about -0.07 of its potential returns per unit of risk. Safetech Innovations SA is currently generating about -0.11 per unit of risk. If you would invest  1,508  in IM Vinaria Purcari on September 28, 2024 and sell it today you would lose (48.00) from holding IM Vinaria Purcari or give up 3.18% of portfolio value over 90 days.

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

IM Vinaria Purcari  vs.  Safetech Innovations SA

IM Vinaria Purcari

Risk-Adjusted Performance

0 of 100

Very Weak

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

Safetech Innovations

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with IM Vinaria and Safetech Innovations

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

The idea behind IM Vinaria Purcari and Safetech Innovations SA 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.

Check out your portfolio center.

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 Transaction History module to view history of all your transactions and understand their impact on performance.