Correlation Between California Software and IOL Chemicals

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

By analyzing existing cross correlation between California Software and IOL Chemicals and, you can compare the effects of market volatilities on California Software and IOL Chemicals 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 IOL Chemicals. Check out your portfolio center. Please also check ongoing floating volatility patterns of California Software and IOL Chemicals.

Diversification Opportunities for California Software and IOL Chemicals

-0.13

Correlation Coefficient

California Software  IOL Chemicals

Good diversification

The 3 months correlation between California and IOL is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding California Software and IOL Chemicals and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IOL Chemicals 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 IOL Chemicals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IOL Chemicals has no effect on the direction of California Software i.e., California Software and IOL Chemicals go up and down completely randomly.

Pair Corralation between California Software and IOL Chemicals

Assuming the 90 days trading horizon California Software is expected to generate 3.74 times less return on investment than IOL Chemicals. In addition to that, California Software is 1.43 times more volatile than IOL Chemicals and. It trades about 0.01 of its total potential returns per unit of risk. IOL Chemicals and is currently generating about 0.03 per unit of volatility. If you would invest  30,524  in IOL Chemicals and on October 27, 2024 and sell it today you would earn a total of  7,381  from holding IOL Chemicals and or generate 24.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.59%
Values	Daily Returns

California Software  vs.  IOL Chemicals and

California Software

Risk-Adjusted Performance

0 of 100

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 uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

IOL Chemicals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days IOL Chemicals and has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy essential indicators, IOL Chemicals is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with California Software and IOL Chemicals

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

The idea behind California Software and IOL Chemicals and 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.