Correlation Between IT Link and Axway Software

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

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

Diversification Opportunities for IT Link and Axway Software

-0.08

Correlation Coefficient

IT Link  Axway Software

Good diversification

The 3 months correlation between ALITL and Axway is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding IT Link and Axway Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Axway Software and IT Link 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 IT Link are associated (or correlated) with Axway Software. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Axway Software has no effect on the direction of IT Link i.e., IT Link and Axway Software go up and down completely randomly.

Pair Corralation between IT Link and Axway Software

Assuming the 90 days trading horizon IT Link is expected to under-perform the Axway Software. In addition to that, IT Link is 2.06 times more volatile than Axway Software. It trades about -0.07 of its total potential returns per unit of risk. Axway Software is currently generating about -0.06 per unit of volatility. If you would invest  2,780  in Axway Software on August 30, 2024 and sell it today you would lose (30.00) from holding Axway Software or give up 1.08% of portfolio value over 90 days.

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

IT Link  vs.  Axway Software

IT Link

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days IT Link has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, IT Link is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Axway Software

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Axway Software are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Axway Software sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IT Link and Axway Software

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

The idea behind IT Link and Axway 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.