Correlation Between Bombardier and VVC Exploration

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

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

Diversification Opportunities for Bombardier and VVC Exploration

-0.44

Correlation Coefficient

Bombardier  VVC Exploration

Very good diversification

The 3 months correlation between Bombardier and VVC is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Bombardier and VVC Exploration Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VVC Exploration Corp and Bombardier 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 Bombardier are associated (or correlated) with VVC Exploration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VVC Exploration Corp has no effect on the direction of Bombardier i.e., Bombardier and VVC Exploration go up and down completely randomly.

Pair Corralation between Bombardier and VVC Exploration

Assuming the 90 days trading horizon Bombardier is expected to generate 0.32 times more return on investment than VVC Exploration. However, Bombardier is 3.13 times less risky than VVC Exploration. It trades about 0.11 of its potential returns per unit of risk. VVC Exploration Corp is currently generating about -0.01 per unit of risk. If you would invest  5,219  in Bombardier on January 20, 2024 and sell it today you would earn a total of  449.00  from holding Bombardier or generate 8.6% return on investment over 90 days.

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

Bombardier  vs.  VVC Exploration Corp

Bombardier

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bombardier are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain fundamental drivers, Bombardier unveiled solid returns over the last few months and may actually be approaching a breakup point.

VVC Exploration Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VVC Exploration Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, VVC Exploration 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 Bombardier and VVC Exploration

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

The idea behind Bombardier and VVC Exploration Corp 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.