Correlation Between VIA Technologies and CMC Magnetics

Can any of the company-specific risk be diversified away by investing in both VIA Technologies and CMC Magnetics 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 VIA Technologies and CMC Magnetics into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between VIA Technologies and CMC Magnetics Corp, you can compare the effects of market volatilities on VIA Technologies and CMC Magnetics 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 VIA Technologies with a short position of CMC Magnetics. Check out your portfolio center. Please also check ongoing floating volatility patterns of VIA Technologies and CMC Magnetics.

Diversification Opportunities for VIA Technologies and CMC Magnetics

0.7

Correlation Coefficient

VIA Technologies  CMC Magnetics

Poor diversification

The 3 months correlation between VIA and CMC is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding VIA Technologies and CMC Magnetics Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CMC Magnetics Corp and VIA Technologies 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 VIA Technologies are associated (or correlated) with CMC Magnetics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CMC Magnetics Corp has no effect on the direction of VIA Technologies i.e., VIA Technologies and CMC Magnetics go up and down completely randomly.

Pair Corralation between VIA Technologies and CMC Magnetics

Assuming the 90 days trading horizon VIA Technologies is expected to generate 1.72 times more return on investment than CMC Magnetics. However, VIA Technologies is 1.72 times more volatile than CMC Magnetics Corp. It trades about 0.01 of its potential returns per unit of risk. CMC Magnetics Corp is currently generating about -0.03 per unit of risk. If you would invest  11,491  in VIA Technologies on September 12, 2024 and sell it today you would lose (491.00) from holding VIA Technologies or give up 4.27% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

VIA Technologies  vs.  CMC Magnetics Corp

VIA Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VIA Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

CMC Magnetics Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CMC Magnetics Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, CMC Magnetics is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with VIA Technologies and CMC Magnetics

The main advantage of trading using opposite VIA Technologies and CMC Magnetics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VIA Technologies position performs unexpectedly, CMC Magnetics 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 CMC Magnetics will offset losses from the drop in CMC Magnetics' long position.

The idea behind VIA Technologies and CMC Magnetics Corp 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.

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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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.