Correlation Between Virgin Group and SM Investments
Can any of the company-specific risk be diversified away by investing in both Virgin Group and SM Investments 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 Virgin Group and SM Investments into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Virgin Group Acquisition and SM Investments, you can compare the effects of market volatilities on Virgin Group and SM Investments 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 Virgin Group with a short position of SM Investments. Check out your portfolio center. Please also check ongoing floating volatility patterns of Virgin Group and SM Investments.
Diversification Opportunities for Virgin Group and SM Investments
0.09 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Virgin and SVTMF is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Virgin Group Acquisition and SM Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SM Investments and Virgin Group 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 Virgin Group Acquisition are associated (or correlated) with SM Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SM Investments has no effect on the direction of Virgin Group i.e., Virgin Group and SM Investments go up and down completely randomly.
Pair Corralation between Virgin Group and SM Investments
Given the investment horizon of 90 days Virgin Group Acquisition is expected to generate 3.53 times more return on investment than SM Investments. However, Virgin Group is 3.53 times more volatile than SM Investments. It trades about 0.16 of its potential returns per unit of risk. SM Investments is currently generating about -0.22 per unit of risk. If you would invest 131.00 in Virgin Group Acquisition on September 6, 2024 and sell it today you would earn a total of 21.00 from holding Virgin Group Acquisition or generate 16.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Virgin Group Acquisition vs. SM Investments
Performance |
| Timeline |
| Virgin Group Acquisition |
| SM Investments |
Virgin Group and SM Investments Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Virgin Group and SM Investments
The main advantage of trading using opposite Virgin Group and SM Investments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Virgin Group position performs unexpectedly, SM Investments 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 SM Investments will offset losses from the drop in SM Investments' long position.| Virgin Group vs. Mannatech Incorporated | Virgin Group vs. Edgewell Personal Care | Virgin Group vs. Inter Parfums | Virgin Group vs. Nu Skin Enterprises |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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