Correlation Between VMware and Opko Health

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Can any of the company-specific risk be diversified away by investing in both VMware and Opko Health 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 Opko Health into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between VMware Inc and Opko Health, you can compare the effects of market volatilities on VMware and Opko Health 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 Opko Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of VMware and Opko Health.

Diversification Opportunities for VMware and Opko Health

0.4
  Correlation Coefficient

Very weak diversification

The 3 months correlation between VMware and Opko is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding VMware Inc and Opko Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Opko Health 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 Opko Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Opko Health has no effect on the direction of VMware i.e., VMware and Opko Health go up and down completely randomly.

Pair Corralation between VMware and Opko Health

If you would invest  34,670  in Opko Health on December 29, 2023 and sell it today you would earn a total of  5,060  from holding Opko Health or generate 14.59% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy5.88%
ValuesDaily Returns

VMware Inc  vs.  Opko Health

 Performance 
       Timeline  
VMware Inc 

Risk-Adjusted Performance

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High
Very Weak
Over the last 90 days VMware Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable primary indicators, VMware is not utilizing all of its potentials. The newest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.
Opko Health 

Risk-Adjusted Performance

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Low
 
High
Very Weak
Over the last 90 days Opko Health 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 forward-looking signals remain somewhat strong which may send shares a bit higher in April 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

VMware and Opko Health Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with VMware and Opko Health

The main advantage of trading using opposite VMware and Opko Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VMware position performs unexpectedly, Opko Health 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 Opko Health will offset losses from the drop in Opko Health's long position.
The idea behind VMware Inc and Opko Health 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.

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