Correlation Between Edgio and VMware
Can any of the company-specific risk be diversified away by investing in both Edgio and VMware 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 Edgio and VMware into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Edgio Inc and VMware Inc, you can compare the effects of market volatilities on Edgio and VMware 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 Edgio with a short position of VMware. Check out your portfolio center. Please also check ongoing floating volatility patterns of Edgio and VMware.
Diversification Opportunities for Edgio and VMware
Excellent diversification
The 3 months correlation between Edgio and VMware is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Edgio Inc and VMware Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VMware Inc and Edgio 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 Edgio Inc are associated (or correlated) with VMware. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VMware Inc has no effect on the direction of Edgio i.e., Edgio and VMware go up and down completely randomly.
Pair Corralation between Edgio and VMware
Given the investment horizon of 90 days Edgio Inc is expected to generate 52.88 times more return on investment than VMware. However, Edgio is 52.88 times more volatile than VMware Inc. It trades about 0.08 of its potential returns per unit of risk. VMware Inc is currently generating about 0.14 per unit of risk. If you would invest 6,280 in Edgio Inc on October 23, 2024 and sell it today you would lose (6,278) from holding Edgio Inc or give up 99.97% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 26.37% |
| Values | Daily Returns |
Edgio Inc vs. VMware Inc
Performance |
| Timeline |
| Edgio Inc |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Solid
| VMware Inc |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Edgio and VMware Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Edgio and VMware
The main advantage of trading using opposite Edgio and VMware positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Edgio position performs unexpectedly, VMware 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 VMware will offset losses from the drop in VMware's long position.The idea behind Edgio Inc and VMware Inc 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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