Correlation Between Rexel SA and VMware

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

Diversification Opportunities for Rexel SA and VMware

0.69
  Correlation Coefficient

Poor diversification

The 3 months correlation between Rexel and VMware is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Rexel SA and VMware Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VMware Inc and Rexel SA 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 Rexel 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 Rexel SA i.e., Rexel SA and VMware go up and down completely randomly.

Pair Corralation between Rexel SA and VMware

Assuming the 90 days horizon Rexel SA is expected to generate 3.24 times more return on investment than VMware. However, Rexel SA is 3.24 times more volatile than VMware Inc. It trades about 0.16 of its potential returns per unit of risk. VMware Inc is currently generating about 0.3 per unit of risk. If you would invest  1,665  in Rexel SA on September 3, 2022 and sell it today you would earn a total of  237.00  from holding Rexel SA or generate 14.23% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Rexel SA  vs.  VMware Inc

 Performance (%) 
       Timeline  
Rexel SA 
Rexel Performance
7 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Rexel SA are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Rexel SA exhibited solid returns over the last few months and may actually be approaching a breakup point.

Rexel Price Channel

VMware Inc 
VMware Performance
4 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in VMware Inc are ranked lower than 4 (%) 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

Rexel SA and VMware Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Rexel SA and VMware

The main advantage of trading using opposite Rexel SA and VMware positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rexel SA 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 Rexel 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.

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