Correlation Between Global Payments and Via Renewables

Can any of the company-specific risk be diversified away by investing in both Global Payments and Via Renewables 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 Global Payments and Via Renewables into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Global Payments and Via Renewables, you can compare the effects of market volatilities on Global Payments and Via Renewables 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 Global Payments with a short position of Via Renewables. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Payments and Via Renewables.

Diversification Opportunities for Global Payments and Via Renewables

-0.49

Correlation Coefficient

Global Payments  Via Renewables

Very good diversification

The 3 months correlation between Global and Via is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Global Payments and Via Renewables in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Via Renewables and Global Payments 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 Global Payments are associated (or correlated) with Via Renewables. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Via Renewables has no effect on the direction of Global Payments i.e., Global Payments and Via Renewables go up and down completely randomly.

Pair Corralation between Global Payments and Via Renewables

Considering the 90-day investment horizon Global Payments is expected to under-perform the Via Renewables. But the stock apears to be less risky and, when comparing its historical volatility, Global Payments is 1.93 times less risky than Via Renewables. The stock trades about -0.23 of its potential returns per unit of risk. The Via Renewables is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  2,020  in Via Renewables on February 1, 2024 and sell it today you would lose (59.00) from holding Via Renewables or give up 2.92% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Global Payments  vs.  Via Renewables

Global Payments

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Global Payments has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Via Renewables

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Via Renewables are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Via Renewables may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Global Payments and Via Renewables

The main advantage of trading using opposite Global Payments and Via Renewables positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Payments position performs unexpectedly, Via Renewables 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 Via Renewables will offset losses from the drop in Via Renewables' long position.

The idea behind Global Payments and Via Renewables 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 the Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.