Correlation Between VeriSign and VNET Group

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Can any of the company-specific risk be diversified away by investing in both VeriSign and VNET Group 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 VeriSign and VNET Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between VeriSign and VNET Group DRC, you can compare the effects of market volatilities on VeriSign and VNET Group 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 VeriSign with a short position of VNET Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of VeriSign and VNET Group.

Diversification Opportunities for VeriSign and VNET Group

0.6
  Correlation Coefficient

Poor diversification

The 3 months correlation between VeriSign and VNET is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding VeriSign and VNET Group DRC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VNET Group DRC and VeriSign 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 VeriSign are associated (or correlated) with VNET Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VNET Group DRC has no effect on the direction of VeriSign i.e., VeriSign and VNET Group go up and down completely randomly.

Pair Corralation between VeriSign and VNET Group

Given the investment horizon of 90 days VeriSign is expected to under-perform the VNET Group. But the stock apears to be less risky and, when comparing its historical volatility, VeriSign is 6.56 times less risky than VNET Group. The stock trades about -0.14 of its potential returns per unit of risk. The VNET Group DRC is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  166.00  in VNET Group DRC on December 29, 2023 and sell it today you would earn a total of  4.00  from holding VNET Group DRC or generate 2.41% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

VeriSign  vs.  VNET Group DRC

 Performance 
       Timeline  
VeriSign 

Risk-Adjusted Performance

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High
Very Weak
Over the last 90 days VeriSign has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.
VNET Group DRC 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days VNET Group DRC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's technical and fundamental indicators remain comparatively stable which may send shares a bit higher in April 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

VeriSign and VNET Group Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with VeriSign and VNET Group

The main advantage of trading using opposite VeriSign and VNET Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VeriSign position performs unexpectedly, VNET Group 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 VNET Group will offset losses from the drop in VNET Group's long position.
The idea behind VeriSign and VNET Group DRC 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.

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