Can any of the company-specific risk be diversified away by investing in both Video Display and Voxeljet 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 Video Display and Voxeljet into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Video Display and Voxeljet Ag, you can compare the effects of market volatilities on Video Display and Voxeljet 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 Video Display with a short position of Voxeljet. Check out your portfolio center. Please also check ongoing floating volatility patterns of Video Display and Voxeljet.
Diversification Opportunities for Video Display and Voxeljet
The 3 months correlation between Video and Voxeljet is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Video Display and Voxeljet Ag in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Voxeljet Ag and Video Display 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 Video Display are associated (or correlated) with Voxeljet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Voxeljet Ag has no effect on the direction of Video Display i.e., Video Display and Voxeljet go up and down completely randomly.
Pair Corralation between Video Display and Voxeljet
Given the investment horizon of 90 days Video Display is expected to generate 0.28 times more return on investment than Voxeljet. However, Video Display is 3.57 times less risky than Voxeljet. It trades about 0.02 of its potential returns per unit of risk. Voxeljet Ag is currently generating about -0.01 per unit of risk. If you would invest 100.00 in Video Display on August 30, 2023 and sell it today you would earn a total of 3.00 from holding Video Display or generate 3.0% return on investment over 90 days.
Over the last 90 days Video Display has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.
Compared to the overall equity markets, risk-adjusted returns on investments in Voxeljet Ag are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady technical and fundamental indicators, Voxeljet unveiled solid returns over the last few months and may actually be approaching a breakup point.
The main advantage of trading using opposite Video Display and Voxeljet positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Video Display position performs unexpectedly, Voxeljet 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 Voxeljet will offset losses from the drop in Voxeljet's long position.
The idea behind Video Display and Voxeljet 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.
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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