Correlation Between Cutler Equity and Vela Large

Can any of the company-specific risk be diversified away by investing in both Cutler Equity and Vela Large 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 Cutler Equity and Vela Large into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Cutler Equity and Vela Large Cap, you can compare the effects of market volatilities on Cutler Equity and Vela Large 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 Cutler Equity with a short position of Vela Large. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cutler Equity and Vela Large.

Diversification Opportunities for Cutler Equity and Vela Large

0.93

Correlation Coefficient

Cutler Equity  Vela Large

Almost no diversification

The 3 months correlation between Cutler and Vela is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Cutler Equity and Vela Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vela Large Cap and Cutler Equity 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 Cutler Equity are associated (or correlated) with Vela Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vela Large Cap has no effect on the direction of Cutler Equity i.e., Cutler Equity and Vela Large go up and down completely randomly.

Pair Corralation between Cutler Equity and Vela Large

Assuming the 90 days horizon Cutler Equity is expected to generate 1.23 times more return on investment than Vela Large. However, Cutler Equity is 1.23 times more volatile than Vela Large Cap. It trades about 0.16 of its potential returns per unit of risk. Vela Large Cap is currently generating about 0.15 per unit of risk. If you would invest  2,736  in Cutler Equity on September 12, 2024 and sell it today you would earn a total of  163.00  from holding Cutler Equity or generate 5.96% return on investment over 90 days.

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

Cutler Equity  vs.  Vela Large Cap

Cutler Equity

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cutler Equity are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical indicators, Cutler Equity is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Vela Large Cap

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vela Large Cap are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Vela Large is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Cutler Equity and Vela Large

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

The idea behind Cutler Equity and Vela Large Cap 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.