Correlation Between Akamai Technologies and Vmware

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

Diversification Opportunities for Akamai Technologies and Vmware

0.82
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Akamai and Vmware is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Akamai Technologies and Vmware Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vmware Inc and Akamai Technologies 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 Akamai Technologies are associated (or correlated) with Vmware. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vmware Inc has no effect on the direction of Akamai Technologies i.e., Akamai Technologies and Vmware go up and down completely randomly.

Pair Corralation between Akamai Technologies and Vmware

Given the investment horizon of 90 days Akamai Technologies is expected to under-perform the Vmware. But the stock apears to be less risky and, when comparing its historical volatility, Akamai Technologies is 1.4 times less risky than Vmware. The stock trades about -0.05 of its potential returns per unit of risk. The Vmware Inc is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  12,183  in Vmware Inc on July 1, 2022 and sell it today you would lose (1,435)  from holding Vmware Inc or give up 11.78% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Akamai Technologies  vs.  Vmware Inc

 Performance (%) 
       Timeline  
Akamai Technologies 
Akamai Performance
0 of 100
Over the last 90 days Akamai Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively steady which may send shares a bit higher in October 2022. The new chaos may also be a sign of medium-term up-swing for the company stakeholders.

Akamai Price Channel

Vmware Inc 
Vmware Performance
0 of 100
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.

Vmware Price Channel

Akamai Technologies and Vmware Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Akamai Technologies and Vmware

The main advantage of trading using opposite Akamai Technologies and Vmware positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Akamai Technologies position performs unexpectedly, Vmware 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 Vmware will offset losses from the drop in Vmware's long position.
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The idea behind Akamai Technologies and Vmware Inc 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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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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.

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