Correlation Between Entergy and VMware

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

Diversification Opportunities for Entergy and VMware

  Correlation Coefficient

Very poor diversification

The 3 months correlation between Entergy and VMware is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Entergy and VMware Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VMware Inc and Entergy 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 Entergy 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 Entergy i.e., Entergy and VMware go up and down completely randomly.

Pair Corralation between Entergy and VMware

Considering the 90-day investment horizon Entergy is expected to generate 1.42 times more return on investment than VMware. However, Entergy is 1.42 times more volatile than VMware Inc. It trades about 0.21 of its potential returns per unit of risk. VMware Inc is currently generating about 0.22 per unit of risk. If you would invest  10,124  in Entergy on September 9, 2022 and sell it today you would earn a total of  1,576  from holding Entergy or generate 15.57% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
ValuesDaily Returns

Entergy  vs.  VMware Inc

 Performance (%) 
Entergy Performance
0 of 100
Over the last 90 days Entergy has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Entergy is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Entergy 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 latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

VMware Price Channel

Entergy and VMware Volatility Contrast

   Predicted Return Density   

Pair Trading with Entergy and VMware

The main advantage of trading using opposite Entergy and VMware positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Entergy 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 Entergy 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 Stock Screener module to find equities using custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..

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