Correlation Between VHAI and WixCom

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

By analyzing existing cross correlation between VHAI and WixCom, you can compare the effects of market volatilities on VHAI and WixCom 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 WixCom. Check out your portfolio center. Please also check ongoing floating volatility patterns of VHAI and WixCom.

Diversification Opportunities for VHAI and WixCom

-0.36

Correlation Coefficient

VHAI  WixCom

Very good diversification

The 3 months correlation between VHAI and WixCom is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding VHAI and WixCom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WixCom 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 WixCom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WixCom has no effect on the direction of VHAI i.e., VHAI and WixCom go up and down completely randomly.

Pair Corralation between VHAI and WixCom

Given the investment horizon of 90 days VHAI is expected to under-perform the WixCom. In addition to that, VHAI is 3.14 times more volatile than WixCom. It trades about -0.23 of its total potential returns per unit of risk. WixCom is currently generating about 0.11 per unit of volatility. If you would invest  21,027  in WixCom on September 21, 2024 and sell it today you would earn a total of  1,123  from holding WixCom or generate 5.34% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	31.82%
Values	Daily Returns

VHAI  vs.  WixCom

VHAI

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days VHAI has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly unsteady basic indicators, VHAI demonstrated solid returns over the last few months and may actually be approaching a breakup point.

WixCom

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in WixCom are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain forward indicators, WixCom showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with VHAI and WixCom

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

The idea behind VHAI and WixCom 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 Transaction History module to view history of all your transactions and understand their impact on performance.