Correlation Between VMware and Eaton Vance

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

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

Diversification Opportunities for VMware and Eaton Vance

-0.57

Correlation Coefficient

VMware  Eaton Vance

Excellent diversification

The 3 months correlation between VMware and Eaton is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding VMware Inc and Eaton Vance Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eaton Vance Large 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 Eaton Vance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eaton Vance Large has no effect on the direction of VMware i.e., VMware and Eaton Vance go up and down completely randomly.

Pair Corralation between VMware and Eaton Vance

Considering the 90-day investment horizon VMware Inc is expected to generate 2.09 times more return on investment than Eaton Vance. However, VMware is 2.09 times more volatile than Eaton Vance Large Cap. It trades about 0.05 of its potential returns per unit of risk. Eaton Vance Large Cap is currently generating about 0.03 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 Against
Strength	Very Weak
Accuracy	78.79%
Values	Daily Returns

VMware Inc  vs.  Eaton Vance Large Cap

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.

Eaton Vance Large

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Eaton Vance Large Cap are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Eaton Vance may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with VMware and Eaton Vance

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

The idea behind VMware Inc and Eaton Vance Large Cap 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.