Correlation Between Abra Information and WhiteSmoke Software

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

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

Diversification Opportunities for Abra Information and WhiteSmoke Software

0.73

Correlation Coefficient

Abra Information  WhiteSmoke Software

Poor diversification

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

Pair Corralation between Abra Information and WhiteSmoke Software

Assuming the 90 days trading horizon Abra Information Technologies is expected to under-perform the WhiteSmoke Software. But the stock apears to be less risky and, when comparing its historical volatility, Abra Information Technologies is 2.45 times less risky than WhiteSmoke Software. The stock trades about -0.41 of its potential returns per unit of risk. The WhiteSmoke Software is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest  44,110  in WhiteSmoke Software on September 2, 2024 and sell it today you would lose (4,110) from holding WhiteSmoke Software or give up 9.32% of portfolio value over 90 days.

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

Abra Information Technologies  vs.  WhiteSmoke Software

Abra Information Tec

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Abra Information Technologies are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Abra Information may actually be approaching a critical reversion point that can send shares even higher in January 2025.

WhiteSmoke Software

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in WhiteSmoke Software are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, WhiteSmoke Software sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Abra Information and WhiteSmoke Software

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

The idea behind Abra Information Technologies and WhiteSmoke 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.

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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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.