Correlation Between Vecima Networks and Maxim Power

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

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

Diversification Opportunities for Vecima Networks and Maxim Power

-0.94

Correlation Coefficient

Vecima Networks  Maxim Power

Pay attention - limited upside

The 3 months correlation between Vecima and Maxim is -0.94. Overlapping area represents the amount of risk that can be diversified away by holding Vecima Networks and Maxim Power Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Maxim Power Corp and Vecima Networks 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 Vecima Networks are associated (or correlated) with Maxim Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Maxim Power Corp has no effect on the direction of Vecima Networks i.e., Vecima Networks and Maxim Power go up and down completely randomly.

Pair Corralation between Vecima Networks and Maxim Power

Assuming the 90 days trading horizon Vecima Networks is expected to under-perform the Maxim Power. But the stock apears to be less risky and, when comparing its historical volatility, Vecima Networks is 1.28 times less risky than Maxim Power. The stock trades about -0.21 of its potential returns per unit of risk. The Maxim Power Corp is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  353.00  in Maxim Power Corp on September 22, 2024 and sell it today you would earn a total of  155.00  from holding Maxim Power Corp or generate 43.91% return on investment over 90 days.

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

Vecima Networks  vs.  Maxim Power Corp

Vecima Networks

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vecima Networks has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's primary indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Maxim Power Corp

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Maxim Power Corp are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, Maxim Power displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Vecima Networks and Maxim Power

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

The idea behind Vecima Networks and Maxim Power 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.

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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.