Correlation Between Pegasystems and Wex

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

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

Diversification Opportunities for Pegasystems and Wex

-0.59

Correlation Coefficient

Pegasystems  Wex

Excellent diversification

The 3 months correlation between Pegasystems and Wex is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Pegasystems and Wex Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wex Inc and Pegasystems 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 Pegasystems are associated (or correlated) with Wex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wex Inc has no effect on the direction of Pegasystems i.e., Pegasystems and Wex go up and down completely randomly.

Pair Corralation between Pegasystems and Wex

Given the investment horizon of 90 days Pegasystems is expected to generate 0.86 times more return on investment than Wex. However, Pegasystems is 1.16 times less risky than Wex. It trades about 0.45 of its potential returns per unit of risk. Wex Inc is currently generating about 0.23 per unit of risk. If you would invest  8,107  in Pegasystems on September 3, 2024 and sell it today you would earn a total of  1,390  from holding Pegasystems or generate 17.15% return on investment over 90 days.

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

Pegasystems  vs.  Wex Inc

Pegasystems

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Pegasystems are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, Pegasystems sustained solid returns over the last few months and may actually be approaching a breakup point.

Wex Inc

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Wex Inc are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong technical and fundamental indicators, Wex is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Pegasystems and Wex

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

The idea behind Pegasystems and Wex Inc 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.