Correlation Between ISoftStone Information and Pylon Technologies

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

By analyzing existing cross correlation between iSoftStone Information Technology and Pylon Technologies Co, you can compare the effects of market volatilities on ISoftStone Information and Pylon Technologies 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 ISoftStone Information with a short position of Pylon Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of ISoftStone Information and Pylon Technologies.

Diversification Opportunities for ISoftStone Information and Pylon Technologies

0.47

Correlation Coefficient

ISoftStone Information  Pylon Technologies

Very weak diversification

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

Pair Corralation between ISoftStone Information and Pylon Technologies

Assuming the 90 days trading horizon iSoftStone Information Technology is expected to generate 1.2 times more return on investment than Pylon Technologies. However, ISoftStone Information is 1.2 times more volatile than Pylon Technologies Co. It trades about -0.15 of its potential returns per unit of risk. Pylon Technologies Co is currently generating about -0.2 per unit of risk. If you would invest  6,559  in iSoftStone Information Technology on October 6, 2024 and sell it today you would lose (1,355) from holding iSoftStone Information Technology or give up 20.66% of portfolio value over 90 days.

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

iSoftStone Information Technol  vs.  Pylon Technologies Co

iSoftStone Information

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iSoftStone Information Technology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pylon Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pylon Technologies Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with ISoftStone Information and Pylon Technologies

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

The idea behind iSoftStone Information Technology and Pylon Technologies Co 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.