Correlation Between VHAI and Science Technology

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

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

Diversification Opportunities for VHAI and Science Technology

-0.69

Correlation Coefficient

VHAI  Science Technology

Excellent diversification

The 3 months correlation between VHAI and Science is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding VHAI and Science Technology Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Science Technology and VHAI 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 VHAI are associated (or correlated) with Science Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Science Technology has no effect on the direction of VHAI i.e., VHAI and Science Technology go up and down completely randomly.

Pair Corralation between VHAI and Science Technology

Given the investment horizon of 90 days VHAI is expected to generate 9.03 times more return on investment than Science Technology. However, VHAI is 9.03 times more volatile than Science Technology Fund. It trades about 0.04 of its potential returns per unit of risk. Science Technology Fund is currently generating about 0.27 per unit of risk. If you would invest  0.61  in VHAI on September 5, 2024 and sell it today you would lose (0.04) from holding VHAI or give up 6.56% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	92.86%
Values	Daily Returns

VHAI  vs.  Science Technology Fund

VHAI

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VHAI has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Science Technology

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Science Technology Fund are ranked lower than 20 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Science Technology showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with VHAI and Science Technology

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

The idea behind VHAI and Science Technology Fund 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.