Correlation Between Vontobel Holding and VP Bank

Can any of the company-specific risk be diversified away by investing in both Vontobel Holding and VP Bank 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 Vontobel Holding and VP Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Vontobel Holding and VP Bank AG, you can compare the effects of market volatilities on Vontobel Holding and VP Bank 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 Vontobel Holding with a short position of VP Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vontobel Holding and VP Bank.

Diversification Opportunities for Vontobel Holding and VP Bank

0.18

Correlation Coefficient

Vontobel Holding  VP Bank

Average diversification

The 3 months correlation between Vontobel and VPBN is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Vontobel Holding and VP Bank AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VP Bank AG and Vontobel Holding 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 Vontobel Holding are associated (or correlated) with VP Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VP Bank AG has no effect on the direction of Vontobel Holding i.e., Vontobel Holding and VP Bank go up and down completely randomly.

Pair Corralation between Vontobel Holding and VP Bank

Assuming the 90 days trading horizon Vontobel Holding is expected to under-perform the VP Bank. In addition to that, Vontobel Holding is 1.19 times more volatile than VP Bank AG. It trades about -0.13 of its total potential returns per unit of risk. VP Bank AG is currently generating about -0.04 per unit of volatility. If you would invest  8,040  in VP Bank AG on January 8, 2025 and sell it today you would lose (320.00) from holding VP Bank AG or give up 3.98% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Vontobel Holding  vs.  VP Bank AG

Vontobel Holding

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vontobel Holding has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

VP Bank AG

Risk-Adjusted Performance

Very Weak

Over the last 90 days VP Bank AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, VP Bank is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Vontobel Holding and VP Bank

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

The idea behind Vontobel Holding and VP Bank AG 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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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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.