Correlation Between VMware and Cardano

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

By analyzing existing cross correlation between VMware Inc and Cardano, you can compare the effects of market volatilities on VMware and Cardano 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 Cardano. Check out your portfolio center. Please also check ongoing floating volatility patterns of VMware and Cardano.

Diversification Opportunities for VMware and Cardano

0.37

Correlation Coefficient

VMware  Cardano

Weak diversification

The 3 months correlation between VMware and Cardano is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding VMware Inc and Cardano in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cardano 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 Cardano. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cardano has no effect on the direction of VMware i.e., VMware and Cardano go up and down completely randomly.

Pair Corralation between VMware and Cardano

Considering the 90-day investment horizon VMware Inc is expected to generate 0.41 times more return on investment than Cardano. However, VMware Inc is 2.42 times less risky than Cardano. It trades about 0.05 of its potential returns per unit of risk. Cardano is currently generating about 0.01 per unit of risk. If you would invest  10,063  in VMware Inc on January 26, 2024 and sell it today you would earn a total of  4,185  from holding VMware Inc or generate 41.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	76.02%
Values	Daily Returns

VMware Inc  vs.  Cardano

VMware Inc

Risk-Adjusted Performance

0 of 100

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 current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Cardano

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Cardano are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Cardano may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with VMware and Cardano

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

The idea behind VMware Inc and Cardano 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.