Correlation Between California Software and EIH Associated

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

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

Diversification Opportunities for California Software and EIH Associated

0.78

Correlation Coefficient

California Software  EIH Associated

Poor diversification

The 3 months correlation between California and EIH is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding California Software and EIH Associated Hotels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EIH Associated Hotels and California 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 California Software are associated (or correlated) with EIH Associated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EIH Associated Hotels has no effect on the direction of California Software i.e., California Software and EIH Associated go up and down completely randomly.

Pair Corralation between California Software and EIH Associated

Assuming the 90 days trading horizon California Software is expected to under-perform the EIH Associated. In addition to that, California Software is 1.92 times more volatile than EIH Associated Hotels. It trades about -0.07 of its total potential returns per unit of risk. EIH Associated Hotels is currently generating about -0.1 per unit of volatility. If you would invest  43,585  in EIH Associated Hotels on December 26, 2024 and sell it today you would lose (8,460) from holding EIH Associated Hotels or give up 19.41% of portfolio value over 90 days.

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

California Software  vs.  EIH Associated Hotels

California Software

Risk-Adjusted Performance

Very Weak

Over the last 90 days California Software has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

EIH Associated Hotels

Risk-Adjusted Performance

Very Weak

Over the last 90 days EIH Associated Hotels has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with California Software and EIH Associated

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

The idea behind California Software and EIH Associated Hotels 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.