Correlation Between Computer Forms and EA Technique

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

By analyzing existing cross correlation between Computer Forms Bhd and EA Technique M, you can compare the effects of market volatilities on Computer Forms and EA Technique 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 Computer Forms with a short position of EA Technique. Check out your portfolio center. Please also check ongoing floating volatility patterns of Computer Forms and EA Technique.

Diversification Opportunities for Computer Forms and EA Technique

0.56

Correlation Coefficient

Computer Forms  EA Technique

Very weak diversification

The 3 months correlation between Computer and 5259 is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Computer Forms Bhd and EA Technique M in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EA Technique M and Computer Forms 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 Computer Forms Bhd are associated (or correlated) with EA Technique. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EA Technique M has no effect on the direction of Computer Forms i.e., Computer Forms and EA Technique go up and down completely randomly.

Pair Corralation between Computer Forms and EA Technique

Assuming the 90 days trading horizon Computer Forms Bhd is expected to under-perform the EA Technique. But the stock apears to be less risky and, when comparing its historical volatility, Computer Forms Bhd is 1.19 times less risky than EA Technique. The stock trades about -0.09 of its potential returns per unit of risk. The EA Technique M is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  19.00  in EA Technique M on August 31, 2024 and sell it today you would earn a total of  11.00  from holding EA Technique M or generate 57.89% return on investment over 90 days.

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

Computer Forms Bhd  vs.  EA Technique M

Computer Forms Bhd

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Computer Forms Bhd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

EA Technique M

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EA Technique M has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, EA Technique is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Computer Forms and EA Technique

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

The idea behind Computer Forms Bhd and EA Technique M 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.