Correlation Between Information Services and Castellum

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

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

Diversification Opportunities for Information Services and Castellum

0.42

Correlation Coefficient

Information Services  Castellum

Very weak diversification

The 3 months correlation between Information and Castellum is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Information Services Group and Castellum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Castellum and Information Services 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 Information Services Group are associated (or correlated) with Castellum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Castellum has no effect on the direction of Information Services i.e., Information Services and Castellum go up and down completely randomly.

Pair Corralation between Information Services and Castellum

Considering the 90-day investment horizon Information Services is expected to generate 1.59 times less return on investment than Castellum. But when comparing it to its historical volatility, Information Services Group is 2.81 times less risky than Castellum. It trades about 0.13 of its potential returns per unit of risk. Castellum is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  17.00  in Castellum on September 1, 2024 and sell it today you would earn a total of  3.00  from holding Castellum or generate 17.65% return on investment over 90 days.

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

Information Services Group  vs.  Castellum

Information Services

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Information Services Group are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak forward indicators, Information Services demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Castellum

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Castellum are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent basic indicators, Castellum displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Information Services and Castellum

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

The idea behind Information Services Group and Castellum 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.