Correlation Between Financial and Computer Modelling

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

By analyzing existing cross correlation between Financial 15 Split and Computer Modelling Group, you can compare the effects of market volatilities on Financial and Computer Modelling 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 Financial with a short position of Computer Modelling. Check out your portfolio center. Please also check ongoing floating volatility patterns of Financial and Computer Modelling.

Diversification Opportunities for Financial and Computer Modelling

-0.72

Correlation Coefficient

Financial  Computer Modelling

Pay attention - limited upside

The 3 months correlation between Financial and Computer is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Financial 15 Split and Computer Modelling Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Computer Modelling and Financial 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 Financial 15 Split are associated (or correlated) with Computer Modelling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Computer Modelling has no effect on the direction of Financial i.e., Financial and Computer Modelling go up and down completely randomly.

Pair Corralation between Financial and Computer Modelling

Assuming the 90 days trading horizon Financial is expected to generate 1.79 times less return on investment than Computer Modelling. But when comparing it to its historical volatility, Financial 15 Split is 10.15 times less risky than Computer Modelling. It trades about 0.3 of its potential returns per unit of risk. Computer Modelling Group is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,030  in Computer Modelling Group on September 25, 2024 and sell it today you would earn a total of  21.00  from holding Computer Modelling Group or generate 2.04% return on investment over 90 days.

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

Financial 15 Split  vs.  Computer Modelling Group

Financial 15 Split

Risk-Adjusted Performance

26 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Financial 15 Split are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Financial is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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 recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Financial and Computer Modelling

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

The idea behind Financial 15 Split and Computer Modelling Group 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.