Correlation Between Vertical Aerospace and Expensify

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

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

Diversification Opportunities for Vertical Aerospace and Expensify

0.22

Correlation Coefficient

Vertical Aerospace  Expensify

Modest diversification

The 3 months correlation between Vertical and Expensify is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Vertical Aerospace and Expensify in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Expensify and Vertical Aerospace 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 Vertical Aerospace are associated (or correlated) with Expensify. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Expensify has no effect on the direction of Vertical Aerospace i.e., Vertical Aerospace and Expensify go up and down completely randomly.

Pair Corralation between Vertical Aerospace and Expensify

Given the investment horizon of 90 days Vertical Aerospace is expected to generate 0.83 times more return on investment than Expensify. However, Vertical Aerospace is 1.21 times less risky than Expensify. It trades about 0.25 of its potential returns per unit of risk. Expensify is currently generating about -0.19 per unit of risk. If you would invest  69.00  in Vertical Aerospace on March 28, 2024 and sell it today you would earn a total of  11.01  from holding Vertical Aerospace or generate 15.96% return on investment over 90 days.

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

Vertical Aerospace  vs.  Expensify

Vertical Aerospace

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vertical Aerospace has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in July 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Expensify

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Expensify has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in July 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Vertical Aerospace and Expensify

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

The idea behind Vertical Aerospace and Expensify 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.