Correlation Between VMware and Salt Lake

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

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

Diversification Opportunities for VMware and Salt Lake

0.0

Correlation Coefficient

VMware  Salt Lake

Pay attention - limited upside

The 3 months correlation between VMware and Salt is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding VMware Inc and Salt Lake Potash in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Salt Lake Potash 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 Salt Lake. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Salt Lake Potash has no effect on the direction of VMware i.e., VMware and Salt Lake go up and down completely randomly.

Pair Corralation between VMware and Salt Lake

If you would invest (100.00) in Salt Lake Potash on January 24, 2024 and sell it today you would earn a total of  100.00  from holding Salt Lake Potash or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

VMware Inc  vs.  Salt Lake Potash

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.

Salt Lake Potash

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Salt Lake Potash has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable essential indicators, Salt Lake is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with VMware and Salt Lake

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

The idea behind VMware Inc and Salt Lake Potash 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..