Correlation Between VMware and Astec Industries

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

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

Diversification Opportunities for VMware and Astec Industries

-0.27

Correlation Coefficient

VMware  Astec Industries

Very good diversification

The 3 months correlation between VMware and Astec is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding VMware Inc and Astec Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Astec Industries 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 Astec Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Astec Industries has no effect on the direction of VMware i.e., VMware and Astec Industries go up and down completely randomly.

Pair Corralation between VMware and Astec Industries

If you would invest  14,248  in VMware Inc on February 6, 2024 and sell it today you would earn a total of  0.00  from holding VMware Inc or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	4.76%
Values	Daily Returns

VMware Inc  vs.  Astec Industries

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

Astec Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Astec Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Astec Industries is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with VMware and Astec Industries

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

The idea behind VMware Inc and Astec Industries 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.