Correlation Between Vestas Wind and Spirax-Sarco Engineering
Can any of the company-specific risk be diversified away by investing in both Vestas Wind and Spirax-Sarco Engineering 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 Vestas Wind and Spirax-Sarco Engineering into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vestas Wind Systems and Spirax Sarco Engineering PLC, you can compare the effects of market volatilities on Vestas Wind and Spirax-Sarco Engineering 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 Vestas Wind with a short position of Spirax-Sarco Engineering. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vestas Wind and Spirax-Sarco Engineering.
Diversification Opportunities for Vestas Wind and Spirax-Sarco Engineering
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Vestas and Spirax-Sarco is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Vestas Wind Systems and Spirax Sarco Engineering PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spirax-Sarco Engineering and Vestas Wind 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 Vestas Wind Systems are associated (or correlated) with Spirax-Sarco Engineering. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spirax-Sarco Engineering has no effect on the direction of Vestas Wind i.e., Vestas Wind and Spirax-Sarco Engineering go up and down completely randomly.
Pair Corralation between Vestas Wind and Spirax-Sarco Engineering
Assuming the 90 days horizon Vestas Wind Systems is expected to under-perform the Spirax-Sarco Engineering. In addition to that, Vestas Wind is 1.25 times more volatile than Spirax Sarco Engineering PLC. It trades about -0.13 of its total potential returns per unit of risk. Spirax Sarco Engineering PLC is currently generating about -0.09 per unit of volatility. If you would invest 6,561 in Spirax Sarco Engineering PLC on August 25, 2024 and sell it today you would lose (2,376) from holding Spirax Sarco Engineering PLC or give up 36.21% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 94.76% |
| Values | Daily Returns |
Vestas Wind Systems vs. Spirax Sarco Engineering PLC
Performance |
| Timeline |
| Vestas Wind Systems |
| Spirax-Sarco Engineering |
Vestas Wind and Spirax-Sarco Engineering Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vestas Wind and Spirax-Sarco Engineering
The main advantage of trading using opposite Vestas Wind and Spirax-Sarco Engineering positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vestas Wind position performs unexpectedly, Spirax-Sarco Engineering 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 Spirax-Sarco Engineering will offset losses from the drop in Spirax-Sarco Engineering's long position.| Vestas Wind vs. KONE Oyj | Vestas Wind vs. Spirax Sarco Engineering PLC | Vestas Wind vs. Atlas Copco ADR | Vestas Wind vs. IDEX Corporation |
| Spirax-Sarco Engineering vs. Aumann AG | Spirax-Sarco Engineering vs. Arista Power | Spirax-Sarco Engineering vs. Atlas Copco AB | Spirax-Sarco Engineering vs. American Commerce Solutions |
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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