Correlation Between Vanguard Small and OVS SpA

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

By analyzing existing cross correlation between Vanguard Small Cap Value and OVS SpA, you can compare the effects of market volatilities on Vanguard Small and OVS SpA 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 Vanguard Small with a short position of OVS SpA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Small and OVS SpA.

Diversification Opportunities for Vanguard Small and OVS SpA

0.98

Correlation Coefficient

Vanguard Small  OVS SpA

Almost no diversification

The 3 months correlation between Vanguard and OVS is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Small Cap Value and OVS SpA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OVS SpA and Vanguard Small 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 Vanguard Small Cap Value are associated (or correlated) with OVS SpA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OVS SpA has no effect on the direction of Vanguard Small i.e., Vanguard Small and OVS SpA go up and down completely randomly.

Pair Corralation between Vanguard Small and OVS SpA

Considering the 90-day investment horizon Vanguard Small is expected to generate 1.02 times less return on investment than OVS SpA. But when comparing it to its historical volatility, Vanguard Small Cap Value is 1.4 times less risky than OVS SpA. It trades about 0.14 of its potential returns per unit of risk. OVS SpA is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  3,548  in OVS SpA on August 30, 2024 and sell it today you would earn a total of  324.00  from holding OVS SpA or generate 9.13% return on investment over 90 days.

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

Vanguard Small Cap Value  vs.  OVS SpA

Vanguard Small Cap

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Small Cap Value are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady fundamental drivers, Vanguard Small may actually be approaching a critical reversion point that can send shares even higher in December 2024.

OVS SpA

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in OVS SpA are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, OVS SpA may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Vanguard Small and OVS SpA

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

The idea behind Vanguard Small Cap Value and OVS SpA 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.