Correlation Between Materialise and UPDATE SOFTWARE

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

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

Diversification Opportunities for Materialise and UPDATE SOFTWARE

0.73

Correlation Coefficient

Materialise  UPDATE SOFTWARE

Poor diversification

The 3 months correlation between Materialise and UPDATE is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Materialise NV and UPDATE SOFTWARE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UPDATE SOFTWARE and Materialise 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 Materialise NV are associated (or correlated) with UPDATE SOFTWARE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UPDATE SOFTWARE has no effect on the direction of Materialise i.e., Materialise and UPDATE SOFTWARE go up and down completely randomly.

Pair Corralation between Materialise and UPDATE SOFTWARE

Assuming the 90 days trading horizon Materialise NV is expected to under-perform the UPDATE SOFTWARE. In addition to that, Materialise is 1.83 times more volatile than UPDATE SOFTWARE. It trades about -0.08 of its total potential returns per unit of risk. UPDATE SOFTWARE is currently generating about -0.12 per unit of volatility. If you would invest  1,624  in UPDATE SOFTWARE on December 24, 2024 and sell it today you would lose (368.00) from holding UPDATE SOFTWARE or give up 22.66% of portfolio value over 90 days.

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

Materialise NV  vs.  UPDATE SOFTWARE

Materialise NV

Risk-Adjusted Performance

Very Weak

Over the last 90 days Materialise NV has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

UPDATE SOFTWARE

Risk-Adjusted Performance

Very Weak

Over the last 90 days UPDATE SOFTWARE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Materialise and UPDATE SOFTWARE

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

The idea behind Materialise NV and UPDATE SOFTWARE 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.