Correlation Between PSI Software and W P

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

By analyzing existing cross correlation between PSI Software AG and W P Carey, you can compare the effects of market volatilities on PSI Software and W P 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 PSI Software with a short position of W P. Check out your portfolio center. Please also check ongoing floating volatility patterns of PSI Software and W P.

Diversification Opportunities for PSI Software and W P

0.61

Correlation Coefficient

PSI Software  W P

Poor diversification

The 3 months correlation between PSI and WPY is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding PSI Software AG and W P Carey in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on W P Carey and PSI Software 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 PSI Software AG are associated (or correlated) with W P. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of W P Carey has no effect on the direction of PSI Software i.e., PSI Software and W P go up and down completely randomly.

Pair Corralation between PSI Software and W P

Assuming the 90 days trading horizon PSI Software AG is expected to generate 1.17 times more return on investment than W P. However, PSI Software is 1.17 times more volatile than W P Carey. It trades about -0.07 of its potential returns per unit of risk. W P Carey is currently generating about -0.12 per unit of risk. If you would invest  2,200  in PSI Software AG on September 22, 2024 and sell it today you would lose (110.00) from holding PSI Software AG or give up 5.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.48%
Values	Daily Returns

PSI Software AG  vs.  W P Carey

PSI Software AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PSI Software AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, PSI Software is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

W P Carey

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days W P Carey has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with PSI Software and W P

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

The idea behind PSI Software AG and W P Carey 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.