Correlation Between Renoworks Software and Canaf Investments

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

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

Diversification Opportunities for Renoworks Software and Canaf Investments

0.47

Correlation Coefficient

Renoworks Software  Canaf Investments

Very weak diversification

The 3 months correlation between Renoworks and Canaf is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Renoworks Software and Canaf Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canaf Investments and Renoworks 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 Renoworks Software are associated (or correlated) with Canaf Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canaf Investments has no effect on the direction of Renoworks Software i.e., Renoworks Software and Canaf Investments go up and down completely randomly.

Pair Corralation between Renoworks Software and Canaf Investments

Given the investment horizon of 90 days Renoworks Software is expected to under-perform the Canaf Investments. But the stock apears to be less risky and, when comparing its historical volatility, Renoworks Software is 1.21 times less risky than Canaf Investments. The stock trades about -0.26 of its potential returns per unit of risk. The Canaf Investments is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest  32.00  in Canaf Investments on September 19, 2024 and sell it today you would lose (3.00) from holding Canaf Investments or give up 9.38% of portfolio value over 90 days.

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

Renoworks Software  vs.  Canaf Investments

Renoworks Software

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Renoworks Software are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Renoworks Software showed solid returns over the last few months and may actually be approaching a breakup point.

Canaf Investments

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Canaf Investments are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Canaf Investments showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Renoworks Software and Canaf Investments

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

The idea behind Renoworks Software and Canaf Investments 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.