Correlation Between Moog and VSE
Can any of the company-specific risk be diversified away by investing in both Moog and VSE 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 Moog and VSE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Moog Inc and VSE Corporation, you can compare the effects of market volatilities on Moog and VSE 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 Moog with a short position of VSE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Moog and VSE.
Diversification Opportunities for Moog and VSE
Poor diversification
The 3 months correlation between Moog and VSE is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Moog Inc and VSE Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VSE Corporation and Moog 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 Moog Inc are associated (or correlated) with VSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VSE Corporation has no effect on the direction of Moog i.e., Moog and VSE go up and down completely randomly.
Pair Corralation between Moog and VSE
Assuming the 90 days horizon Moog is expected to generate 3.01 times less return on investment than VSE. But when comparing it to its historical volatility, Moog Inc is 1.41 times less risky than VSE. It trades about 0.12 of its potential returns per unit of risk. VSE Corporation is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest 8,268 in VSE Corporation on August 26, 2024 and sell it today you would earn a total of 3,430 from holding VSE Corporation or generate 41.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Moog Inc vs. VSE Corp.
Performance |
| Timeline |
| Moog Inc |
| VSE Corporation |
Moog and VSE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Moog and VSE
The main advantage of trading using opposite Moog and VSE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Moog position performs unexpectedly, VSE 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 VSE will offset losses from the drop in VSE's long position.The idea behind Moog Inc and VSE Corporation 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.| VSE vs. Park Electrochemical | VSE vs. Innovative Solutions and | VSE vs. Curtiss Wright | VSE vs. National Presto Industries |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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