Correlation Between Information Services and Computer Modelling

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

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

Diversification Opportunities for Information Services and Computer Modelling

0.56

Correlation Coefficient

Information Services  Computer Modelling

Very weak diversification

The 3 months correlation between Information and Computer is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Information Services and Computer Modelling Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Computer Modelling 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 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 Information Services i.e., Information Services and Computer Modelling go up and down completely randomly.

Pair Corralation between Information Services and Computer Modelling

Assuming the 90 days trading horizon Information Services is expected to under-perform the Computer Modelling. But the stock apears to be less risky and, when comparing its historical volatility, Information Services is 2.44 times less risky than Computer Modelling. The stock trades about -0.09 of its potential returns per unit of risk. The Computer Modelling Group is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  1,157  in Computer Modelling Group on September 14, 2024 and sell it today you would lose (68.00) from holding Computer Modelling Group or give up 5.88% of portfolio value over 90 days.

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

Information Services  vs.  Computer Modelling Group

Information Services

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Information Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Information Services is not utilizing all of its potentials. The recent stock price disarray, 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 Information Services and Computer Modelling

The main advantage of trading using opposite Information Services and Computer Modelling positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Information Services 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 Information Services 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.

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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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.