Correlation Between Snowflake and Vestas Wind
Can any of the company-specific risk be diversified away by investing in both Snowflake and Vestas Wind 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 Snowflake and Vestas Wind into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Snowflake and Vestas Wind Systems, you can compare the effects of market volatilities on Snowflake and Vestas Wind 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 Snowflake with a short position of Vestas Wind. Check out your portfolio center. Please also check ongoing floating volatility patterns of Snowflake and Vestas Wind.
Diversification Opportunities for Snowflake and Vestas Wind
-0.69 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Snowflake and Vestas is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Snowflake and Vestas Wind Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vestas Wind Systems and Snowflake 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 Snowflake are associated (or correlated) with Vestas Wind. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vestas Wind Systems has no effect on the direction of Snowflake i.e., Snowflake and Vestas Wind go up and down completely randomly.
Pair Corralation between Snowflake and Vestas Wind
Given the investment horizon of 90 days Snowflake is expected to generate 1.77 times more return on investment than Vestas Wind. However, Snowflake is 1.77 times more volatile than Vestas Wind Systems. It trades about 0.26 of its potential returns per unit of risk. Vestas Wind Systems is currently generating about -0.35 per unit of risk. If you would invest 11,733 in Snowflake on August 27, 2024 and sell it today you would earn a total of 5,011 from holding Snowflake or generate 42.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Snowflake vs. Vestas Wind Systems
Performance |
| Timeline |
| Snowflake |
| Vestas Wind Systems |
Snowflake and Vestas Wind Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Snowflake and Vestas Wind
The main advantage of trading using opposite Snowflake and Vestas Wind positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Snowflake position performs unexpectedly, Vestas Wind 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 Vestas Wind will offset losses from the drop in Vestas Wind's long position.The idea behind Snowflake and Vestas Wind Systems 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.| Vestas Wind vs. Kone Oyj ADR | Vestas Wind vs. Schneider Electric SE | Vestas Wind vs. Schneider Electric SA | Vestas Wind vs. Fanuc |
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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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