Correlation Between VSE and VirTra
Can any of the company-specific risk be diversified away by investing in both VSE and VirTra 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 VSE and VirTra into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between VSE Corporation and VirTra Inc, you can compare the effects of market volatilities on VSE and VirTra 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 VSE with a short position of VirTra. Check out your portfolio center. Please also check ongoing floating volatility patterns of VSE and VirTra.
Diversification Opportunities for VSE and VirTra
Poor diversification
The 3 months correlation between VSE and VirTra is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding VSE Corp. and VirTra Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VirTra Inc and VSE 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 VSE Corporation are associated (or correlated) with VirTra. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VirTra Inc has no effect on the direction of VSE i.e., VSE and VirTra go up and down completely randomly.
Pair Corralation between VSE and VirTra
Given the investment horizon of 90 days VSE Corporation is expected to generate 0.73 times more return on investment than VirTra. However, VSE Corporation is 1.37 times less risky than VirTra. It trades about 0.25 of its potential returns per unit of risk. VirTra Inc is currently generating about 0.14 per unit of risk. If you would invest 8,265 in VSE Corporation on August 29, 2024 and sell it today you would earn a total of 3,361 from holding VSE Corporation or generate 40.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
VSE Corp. vs. VirTra Inc
Performance |
| Timeline |
| VSE Corporation |
| VirTra Inc |
VSE and VirTra Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with VSE and VirTra
The main advantage of trading using opposite VSE and VirTra positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VSE position performs unexpectedly, VirTra 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 VirTra will offset losses from the drop in VirTra's long position.| VSE vs. Park Electrochemical | VSE vs. Innovative Solutions and | VSE vs. Curtiss Wright | VSE vs. National Presto Industries |
| VirTra vs. Innovative Solutions and | VirTra vs. Park Electrochemical | VirTra vs. Ducommun Incorporated | VirTra 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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