Correlation Between VMware and Snam SpA

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

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

Diversification Opportunities for VMware and Snam SpA

0.36

Correlation Coefficient

VMware  Snam SpA

Weak diversification

The 3 months correlation between VMware and Snam is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding VMware Inc and Snam SpA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Snam SpA ADR 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 Snam SpA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Snam SpA ADR has no effect on the direction of VMware i.e., VMware and Snam SpA go up and down completely randomly.

Pair Corralation between VMware and Snam SpA

If you would invest  14,248  in VMware Inc on January 17, 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 Together
Strength	Very Weak
Accuracy	4.76%
Values	Daily Returns

VMware Inc  vs.  Snam SpA ADR

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.

Snam SpA ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Snam SpA ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with VMware and Snam SpA

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

The idea behind VMware Inc and Snam SpA ADR 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 AI Investment Finder module to use AI to screen and filter profitable investment opportunities.