Correlation Between VGI Public and SG Capital

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

By analyzing existing cross correlation between VGI Public and SG Capital PCL, you can compare the effects of market volatilities on VGI Public and SG Capital 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 VGI Public with a short position of SG Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of VGI Public and SG Capital.

Diversification Opportunities for VGI Public and SG Capital

-0.26

Correlation Coefficient

VGI Public  SG Capital

Very good diversification

The 3 months correlation between VGI and SGC is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding VGI Public and SG Capital PCL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SG Capital PCL and VGI Public 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 VGI Public are associated (or correlated) with SG Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SG Capital PCL has no effect on the direction of VGI Public i.e., VGI Public and SG Capital go up and down completely randomly.

Pair Corralation between VGI Public and SG Capital

Assuming the 90 days trading horizon VGI Public is expected to generate 1.52 times more return on investment than SG Capital. However, VGI Public is 1.52 times more volatile than SG Capital PCL. It trades about 0.35 of its potential returns per unit of risk. SG Capital PCL is currently generating about -0.26 per unit of risk. If you would invest  260.00  in VGI Public on September 25, 2024 and sell it today you would earn a total of  60.00  from holding VGI Public or generate 23.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.0%
Values	Daily Returns

VGI Public  vs.  SG Capital PCL

VGI Public

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in VGI Public are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward indicators, VGI Public disclosed solid returns over the last few months and may actually be approaching a breakup point.

SG Capital PCL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SG Capital PCL has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with VGI Public and SG Capital

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

The idea behind VGI Public and SG Capital PCL 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.