Correlation Between Logitech International and VMware

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

Diversification Opportunities for Logitech International and VMware

0.77
  Correlation Coefficient

Poor diversification

The 3 months correlation between Logitech and VMware is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Logitech International SA and VMware Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VMware Inc and Logitech International 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 Logitech International SA 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 Logitech International i.e., Logitech International and VMware go up and down completely randomly.

Pair Corralation between Logitech International and VMware

Given the investment horizon of 90 days Logitech International SA is expected to generate 2.59 times more return on investment than VMware. However, Logitech International is 2.59 times more volatile than VMware Inc. It trades about 0.4 of its potential returns per unit of risk. VMware Inc is currently generating about 0.39 per unit of risk. If you would invest  4,831  in Logitech International SA on September 4, 2022 and sell it today you would earn a total of  1,443  from holding Logitech International SA or generate 29.87% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Logitech International SA  vs.  VMware Inc

 Performance (%) 
       Timeline  
Logitech International 
Logitech Performance
12 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Logitech International SA are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, Logitech International reported solid returns over the last few months and may actually be approaching a breakup point.

Logitech Price Channel

VMware Inc 
VMware Performance
5 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in VMware Inc are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. 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

Logitech International and VMware Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Logitech International and VMware

The main advantage of trading using opposite Logitech International and VMware positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Logitech International 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 Logitech International SA 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.

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