Correlation Between Caledonia Investments and Victoria PLC
Can any of the company-specific risk be diversified away by investing in both Caledonia Investments and Victoria PLC 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 Caledonia Investments and Victoria PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caledonia Investments and Victoria PLC, you can compare the effects of market volatilities on Caledonia Investments and Victoria PLC 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 Caledonia Investments with a short position of Victoria PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caledonia Investments and Victoria PLC.
Diversification Opportunities for Caledonia Investments and Victoria PLC
0.11 | Correlation Coefficient |
Average diversification
The 3 months correlation between Caledonia and Victoria is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Caledonia Investments and Victoria PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Victoria PLC and Caledonia Investments 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 Caledonia Investments are associated (or correlated) with Victoria PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Victoria PLC has no effect on the direction of Caledonia Investments i.e., Caledonia Investments and Victoria PLC go up and down completely randomly.
Pair Corralation between Caledonia Investments and Victoria PLC
Assuming the 90 days trading horizon Caledonia Investments is expected to generate 21.13 times less return on investment than Victoria PLC. But when comparing it to its historical volatility, Caledonia Investments is 8.94 times less risky than Victoria PLC. It trades about 0.22 of its potential returns per unit of risk. Victoria PLC is currently generating about 0.52 of returns per unit of risk over similar time horizon. If you would invest 5,740 in Victoria PLC on October 21, 2024 and sell it today you would earn a total of 6,580 from holding Victoria PLC or generate 114.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Caledonia Investments vs. Victoria PLC
Performance |
| Timeline |
| Caledonia Investments |
| Victoria PLC |
Caledonia Investments and Victoria PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caledonia Investments and Victoria PLC
The main advantage of trading using opposite Caledonia Investments and Victoria PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caledonia Investments position performs unexpectedly, Victoria PLC 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 Victoria PLC will offset losses from the drop in Victoria PLC's long position.| Caledonia Investments vs. Bioventix | Caledonia Investments vs. VeriSign | Caledonia Investments vs. Games Workshop Group | Caledonia Investments vs. AJ Bell plc |
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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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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