Correlation Between Vela Small and Vela International
Can any of the company-specific risk be diversified away by investing in both Vela Small and Vela International 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 Small and Vela International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vela Small Cap and Vela International, you can compare the effects of market volatilities on Vela Small and Vela International 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 Small with a short position of Vela International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vela Small and Vela International.
Diversification Opportunities for Vela Small and Vela International
-0.32 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Vela and Vela is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Vela Small Cap and Vela International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vela International and Vela Small 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 Small Cap are associated (or correlated) with Vela International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vela International has no effect on the direction of Vela Small i.e., Vela Small and Vela International go up and down completely randomly.
Pair Corralation between Vela Small and Vela International
Assuming the 90 days horizon Vela Small Cap is expected to generate 1.23 times more return on investment than Vela International. However, Vela Small is 1.23 times more volatile than Vela International. It trades about 0.08 of its potential returns per unit of risk. Vela International is currently generating about 0.04 per unit of risk. If you would invest 1,594 in Vela Small Cap on August 31, 2024 and sell it today you would earn a total of 419.00 from holding Vela Small Cap or generate 26.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vela Small Cap vs. Vela International
Performance |
| Timeline |
| Vela Small Cap |
| Vela International |
Vela Small and Vela International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vela Small and Vela International
The main advantage of trading using opposite Vela Small and Vela International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vela Small position performs unexpectedly, Vela International 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 International will offset losses from the drop in Vela International's long position.| Vela Small vs. Gamco Natural Resources | Vela Small vs. Fidelity Advisor Energy | Vela Small vs. Energy Basic Materials | Vela Small vs. Firsthand Alternative Energy |
| Vela International vs. Nationwide Growth Fund | Vela International vs. Small Pany Growth | Vela International vs. Small Midcap Dividend Income | Vela International vs. Victory Rs Small |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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