Correlation Between Velan and TVA
Can any of the company-specific risk be diversified away by investing in both Velan and TVA 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 Velan and TVA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Velan Inc and TVA Group, you can compare the effects of market volatilities on Velan and TVA 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 Velan with a short position of TVA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Velan and TVA.
Diversification Opportunities for Velan and TVA
Very good diversification
The 3 months correlation between Velan and TVA is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Velan Inc and TVA Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TVA Group and Velan 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 Velan Inc are associated (or correlated) with TVA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TVA Group has no effect on the direction of Velan i.e., Velan and TVA go up and down completely randomly.
Pair Corralation between Velan and TVA
Assuming the 90 days trading horizon Velan Inc is expected to generate 0.96 times more return on investment than TVA. However, Velan Inc is 1.04 times less risky than TVA. It trades about 0.24 of its potential returns per unit of risk. TVA Group is currently generating about -0.01 per unit of risk. If you would invest 1,098 in Velan Inc on November 3, 2024 and sell it today you would earn a total of 546.00 from holding Velan Inc or generate 49.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Velan Inc vs. TVA Group
Performance |
| Timeline |
| Velan Inc |
| TVA Group |
Velan and TVA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Velan and TVA
The main advantage of trading using opposite Velan and TVA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Velan position performs unexpectedly, TVA 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 TVA will offset losses from the drop in TVA's long position.The idea behind Velan Inc and TVA Group 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.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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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