Correlation Between Formula Systems and CACI International

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

By analyzing existing cross correlation between Formula Systems 1985 and CACI International, you can compare the effects of market volatilities on Formula Systems and CACI International 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 Formula Systems with a short position of CACI International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Formula Systems and CACI International.

Diversification Opportunities for Formula Systems and CACI International

-0.09

Correlation Coefficient

Formula Systems  CACI International

Good diversification

The 3 months correlation between Formula and CACI is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Formula Systems 1985 and CACI International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CACI International and Formula Systems 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 Formula Systems 1985 are associated (or correlated) with CACI International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CACI International has no effect on the direction of Formula Systems i.e., Formula Systems and CACI International go up and down completely randomly.

Pair Corralation between Formula Systems and CACI International

Assuming the 90 days horizon Formula Systems 1985 is expected to generate 1.29 times more return on investment than CACI International. However, Formula Systems is 1.29 times more volatile than CACI International. It trades about 0.14 of its potential returns per unit of risk. CACI International is currently generating about -0.06 per unit of risk. If you would invest  7,690  in Formula Systems 1985 on September 13, 2024 and sell it today you would earn a total of  1,960  from holding Formula Systems 1985 or generate 25.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Formula Systems 1985  vs.  CACI International

Formula Systems 1985

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Formula Systems 1985 are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Formula Systems showed solid returns over the last few months and may actually be approaching a breakup point.

CACI International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CACI International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's fundamental indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with Formula Systems and CACI International

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

The idea behind Formula Systems 1985 and CACI International 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.