Correlation Between VP Bank and Liechtensteinische

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

By analyzing existing cross correlation between VP Bank AG and Liechtensteinische Landesbank AG, you can compare the effects of market volatilities on VP Bank and Liechtensteinische 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 VP Bank with a short position of Liechtensteinische. Check out your portfolio center. Please also check ongoing floating volatility patterns of VP Bank and Liechtensteinische.

Diversification Opportunities for VP Bank and Liechtensteinische

-0.08

Correlation Coefficient

VP Bank  Liechtensteinische

Good diversification

The 3 months correlation between VPBN and Liechtensteinische is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding VP Bank AG and Liechtensteinische Landesbank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liechtensteinische and VP Bank 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 VP Bank AG are associated (or correlated) with Liechtensteinische. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Liechtensteinische has no effect on the direction of VP Bank i.e., VP Bank and Liechtensteinische go up and down completely randomly.

Pair Corralation between VP Bank and Liechtensteinische

Assuming the 90 days trading horizon VP Bank AG is expected to generate 1.94 times more return on investment than Liechtensteinische. However, VP Bank is 1.94 times more volatile than Liechtensteinische Landesbank AG. It trades about -0.01 of its potential returns per unit of risk. Liechtensteinische Landesbank AG is currently generating about -0.13 per unit of risk. If you would invest  7,600  in VP Bank AG on September 2, 2024 and sell it today you would lose (140.00) from holding VP Bank AG or give up 1.84% of portfolio value over 90 days.

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

VP Bank AG  vs.  Liechtensteinische Landesbank

VP Bank AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VP Bank AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, VP Bank is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Liechtensteinische

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Liechtensteinische Landesbank AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Liechtensteinische is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with VP Bank and Liechtensteinische

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

The idea behind VP Bank AG and Liechtensteinische Landesbank AG 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.