Correlation Between Computer Modelling and Richelieu Hardware

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

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

Diversification Opportunities for Computer Modelling and Richelieu Hardware

-0.29

Correlation Coefficient

Computer Modelling  Richelieu Hardware

Very good diversification

The 3 months correlation between Computer and Richelieu is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Computer Modelling Group and Richelieu Hardware in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Richelieu Hardware and Computer Modelling 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 Computer Modelling Group are associated (or correlated) with Richelieu Hardware. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Richelieu Hardware has no effect on the direction of Computer Modelling i.e., Computer Modelling and Richelieu Hardware go up and down completely randomly.

Pair Corralation between Computer Modelling and Richelieu Hardware

Assuming the 90 days trading horizon Computer Modelling Group is expected to under-perform the Richelieu Hardware. In addition to that, Computer Modelling is 1.83 times more volatile than Richelieu Hardware. It trades about -0.03 of its total potential returns per unit of risk. Richelieu Hardware is currently generating about 0.0 per unit of volatility. If you would invest  3,892  in Richelieu Hardware on September 12, 2024 and sell it today you would lose (8.00) from holding Richelieu Hardware or give up 0.21% of portfolio value over 90 days.

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

Computer Modelling Group  vs.  Richelieu Hardware

Computer Modelling

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Computer Modelling Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Computer Modelling is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Richelieu Hardware

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Richelieu Hardware has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical indicators, Richelieu Hardware is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Computer Modelling and Richelieu Hardware

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

The idea behind Computer Modelling Group and Richelieu Hardware 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.