Correlation Between Vroom and Peabody Energy

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

Diversification Opportunities for Vroom and Peabody Energy

-0.28
  Correlation Coefficient

Very good diversification

The 3 months correlation between Vroom and Peabody is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Vroom Inc and Peabody Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Peabody Energy Corp and Vroom 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 Vroom Inc are associated (or correlated) with Peabody Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Peabody Energy Corp has no effect on the direction of Vroom i.e., Vroom and Peabody Energy go up and down completely randomly.

Pair Corralation between Vroom and Peabody Energy

Considering the 90-day investment horizon Vroom Inc is expected to under-perform the Peabody Energy. But the stock apears to be less risky and, when comparing its historical volatility, Vroom Inc is 1.08 times less risky than Peabody Energy. The stock trades about -0.07 of its potential returns per unit of risk. The Peabody Energy Corp is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  167.00  in Peabody Energy Corp on August 30, 2022 and sell it today you would earn a total of  2,853  from holding Peabody Energy Corp or generate 1708.38% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Vroom Inc  vs.  Peabody Energy Corp

 Performance (%) 
       Timeline  
Vroom Inc 
Vroom Performance
0 of 100
Over the last 90 days Vroom Inc 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 December 2022. The new chaos may also be a sign of medium-term up-swing for the company stakeholders.

Vroom Price Channel

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

Peabody Price Channel

Vroom and Peabody Energy Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Vroom and Peabody Energy

The main advantage of trading using opposite Vroom and Peabody Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vroom position performs unexpectedly, Peabody Energy 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 Peabody Energy will offset losses from the drop in Peabody Energy's long position.
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The idea behind Vroom Inc and Peabody Energy Corp 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.

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