Correlation Between California Software and Sandhar Technologies

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

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

Diversification Opportunities for California Software and Sandhar Technologies

0.38

Correlation Coefficient

California Software  Sandhar Technologies

Weak diversification

The 3 months correlation between California and Sandhar is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding California Software and Sandhar Technologies Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sandhar Technologies and California Software 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 California Software are associated (or correlated) with Sandhar Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sandhar Technologies has no effect on the direction of California Software i.e., California Software and Sandhar Technologies go up and down completely randomly.

Pair Corralation between California Software and Sandhar Technologies

Assuming the 90 days trading horizon California Software is expected to under-perform the Sandhar Technologies. But the stock apears to be less risky and, when comparing its historical volatility, California Software is 1.05 times less risky than Sandhar Technologies. The stock trades about -0.19 of its potential returns per unit of risk. The Sandhar Technologies Limited is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  55,510  in Sandhar Technologies Limited on September 30, 2024 and sell it today you would lose (3,835) from holding Sandhar Technologies Limited or give up 6.91% of portfolio value over 90 days.

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

California Software  vs.  Sandhar Technologies Limited

California Software

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days California Software has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Sandhar Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sandhar Technologies Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical indicators, Sandhar Technologies is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with California Software and Sandhar Technologies

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

The idea behind California Software and Sandhar Technologies Limited 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.