Correlation Between VAT Group and Temenos Group

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

By analyzing existing cross correlation between VAT Group AG and Temenos Group AG, you can compare the effects of market volatilities on VAT Group and Temenos Group 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 VAT Group with a short position of Temenos Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of VAT Group and Temenos Group.

Diversification Opportunities for VAT Group and Temenos Group

0.03

Correlation Coefficient

VAT Group  Temenos Group

Significant diversification

The 3 months correlation between VAT and Temenos is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding VAT Group AG and Temenos Group AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Temenos Group AG and VAT Group 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 VAT Group AG are associated (or correlated) with Temenos Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Temenos Group AG has no effect on the direction of VAT Group i.e., VAT Group and Temenos Group go up and down completely randomly.

Pair Corralation between VAT Group and Temenos Group

Assuming the 90 days trading horizon VAT Group AG is expected to under-perform the Temenos Group. In addition to that, VAT Group is 1.06 times more volatile than Temenos Group AG. It trades about -0.12 of its total potential returns per unit of risk. Temenos Group AG is currently generating about 0.1 per unit of volatility. If you would invest  5,960  in Temenos Group AG on September 16, 2024 and sell it today you would earn a total of  665.00  from holding Temenos Group AG or generate 11.16% return on investment over 90 days.

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

VAT Group AG  vs.  Temenos Group AG

VAT Group AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VAT Group AG 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.

Temenos Group AG

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Temenos Group AG are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Temenos Group may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with VAT Group and Temenos Group

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

The idea behind VAT Group AG and Temenos Group AG 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.