Correlation Between Xunlei and Vmware

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

Diversification Opportunities for Xunlei and Vmware

-0.01
  Correlation Coefficient

Good diversification

The 3 months correlation between Xunlei and Vmware is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Xunlei Limited and Vmware Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vmware Inc and Xunlei 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 Xunlei Limited 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 Xunlei i.e., Xunlei and Vmware go up and down completely randomly.

Pair Corralation between Xunlei and Vmware

Given the investment horizon of 90 days Xunlei Limited is expected to generate 1.08 times more return on investment than Vmware. However, Xunlei is 1.08 times more volatile than Vmware Inc. It trades about 0.07 of its potential returns per unit of risk. Vmware Inc is currently generating about 0.04 per unit of risk. If you would invest  141.00  in Xunlei Limited on April 1, 2022 and sell it today you would earn a total of  15.00  from holding Xunlei Limited or generate 10.64% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Xunlei Limited  vs.  Vmware Inc

 Performance (%) 
      Timeline 
Xunlei Limited 
Xunlei Performance
0 of 100
Over the last 90 days Xunlei Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Xunlei Price Channel

Vmware Inc 
Vmware Performance
1 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Vmware Inc are ranked lower than 1 (%) 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

Xunlei and Vmware Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with Xunlei and Vmware

The main advantage of trading using opposite Xunlei and Vmware positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Xunlei 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.
The idea behind Xunlei Limited 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.
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.

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