Correlation Between Axway Software and INTERSHOP Communications

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

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

Diversification Opportunities for Axway Software and INTERSHOP Communications

0.84

Correlation Coefficient

Axway Software  INTERSHOP Communications

Very poor diversification

The 3 months correlation between Axway and INTERSHOP is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Axway Software SA and INTERSHOP Communications Aktie in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INTERSHOP Communications and Axway 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 Axway Software SA are associated (or correlated) with INTERSHOP Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INTERSHOP Communications has no effect on the direction of Axway Software i.e., Axway Software and INTERSHOP Communications go up and down completely randomly.

Pair Corralation between Axway Software and INTERSHOP Communications

Assuming the 90 days trading horizon Axway Software SA is expected to generate 0.67 times more return on investment than INTERSHOP Communications. However, Axway Software SA is 1.49 times less risky than INTERSHOP Communications. It trades about 0.06 of its potential returns per unit of risk. INTERSHOP Communications Aktiengesellschaft is currently generating about -0.02 per unit of risk. If you would invest  1,676  in Axway Software SA on October 5, 2024 and sell it today you would earn a total of  1,054  from holding Axway Software SA or generate 62.89% return on investment over 90 days.

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

Axway Software SA  vs.  INTERSHOP Communications Aktie

Axway Software SA

Risk-Adjusted Performance

0 of 100

Solid

Over the last 90 days Axway Software SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively uncertain basic indicators, Axway Software unveiled solid returns over the last few months and may actually be approaching a breakup point.

INTERSHOP Communications

Risk-Adjusted Performance

0 of 100

Modest

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

Pair Trading with Axway Software and INTERSHOP Communications

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

The idea behind Axway Software SA and INTERSHOP Communications Aktiengesellschaft 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.