Correlation Between VMware and Aerodrome
Can any of the company-specific risk be diversified away by investing in both VMware and Aerodrome 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 VMware and Aerodrome into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between VMware Inc and Aerodrome Group, you can compare the effects of market volatilities on VMware and Aerodrome 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 VMware with a short position of Aerodrome. Check out your portfolio center. Please also check ongoing floating volatility patterns of VMware and Aerodrome.
Diversification Opportunities for VMware and Aerodrome
Excellent diversification
The 3 months correlation between VMware and Aerodrome is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding VMware Inc and Aerodrome Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aerodrome Group and VMware 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 VMware Inc are associated (or correlated) with Aerodrome. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aerodrome Group has no effect on the direction of VMware i.e., VMware and Aerodrome go up and down completely randomly.
Pair Corralation between VMware and Aerodrome
If you would invest 7,390 in Aerodrome Group on January 26, 2024 and sell it today you would earn a total of 1,610 from holding Aerodrome Group or generate 21.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 6.25% |
| Values | Daily Returns |
VMware Inc vs. Aerodrome Group
Performance |
| Timeline |
| VMware Inc |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Aerodrome Group |
VMware and Aerodrome Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with VMware and Aerodrome
The main advantage of trading using opposite VMware and Aerodrome positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VMware position performs unexpectedly, Aerodrome 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 Aerodrome will offset losses from the drop in Aerodrome's long position.The idea behind VMware Inc and Aerodrome Group 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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