Correlation Between Vela International and Vela Small
Can any of the company-specific risk be diversified away by investing in both Vela International and Vela Small 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 Vela International and Vela Small into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vela International and Vela Small Cap, you can compare the effects of market volatilities on Vela International and Vela Small 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 Vela International with a short position of Vela Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vela International and Vela Small.
Diversification Opportunities for Vela International and Vela Small
-0.19 | Correlation Coefficient |
Good diversification
The 3 months correlation between Vela and Vela is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Vela International and Vela Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vela Small Cap and Vela International 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 Vela International are associated (or correlated) with Vela Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vela Small Cap has no effect on the direction of Vela International i.e., Vela International and Vela Small go up and down completely randomly.
Pair Corralation between Vela International and Vela Small
Assuming the 90 days horizon Vela International is expected to generate 2.5 times less return on investment than Vela Small. But when comparing it to its historical volatility, Vela International is 1.27 times less risky than Vela Small. It trades about 0.05 of its potential returns per unit of risk. Vela Small Cap is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 1,709 in Vela Small Cap on August 28, 2024 and sell it today you would earn a total of 307.00 from holding Vela Small Cap or generate 17.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vela International vs. Vela Small Cap
Performance |
| Timeline |
| Vela International |
| Vela Small Cap |
Vela International and Vela Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vela International and Vela Small
The main advantage of trading using opposite Vela International and Vela Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vela International position performs unexpectedly, Vela Small 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 Vela Small will offset losses from the drop in Vela Small's long position.| Vela International vs. Vela Large Cap | Vela International vs. Vela Large Cap | Vela International vs. Vela Small Cap | Vela International vs. Vela Small Cap |
| Vela Small vs. Vela International | Vela Small vs. Vela International | Vela Small vs. Vela Large Cap | Vela Small vs. Vela Large Cap |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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