Correlation Between California Software and Investment Trust

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

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

Diversification Opportunities for California Software and Investment Trust

-0.66

Correlation Coefficient

California Software  Investment Trust

Excellent diversification

The 3 months correlation between California and Investment is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding California Software and The Investment Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Investment Trust 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 Investment Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Investment Trust has no effect on the direction of California Software i.e., California Software and Investment Trust go up and down completely randomly.

Pair Corralation between California Software and Investment Trust

Assuming the 90 days trading horizon California Software is expected to generate 11.18 times less return on investment than Investment Trust. In addition to that, California Software is 1.13 times more volatile than The Investment Trust. It trades about 0.01 of its total potential returns per unit of risk. The Investment Trust is currently generating about 0.08 per unit of volatility. If you would invest  8,610  in The Investment Trust on September 18, 2024 and sell it today you would earn a total of  12,483  from holding The Investment Trust or generate 144.98% return on investment over 90 days.

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

California Software  vs.  The Investment Trust

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

Investment Trust

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in The Investment Trust are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting technical and fundamental indicators, Investment Trust exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with California Software and Investment Trust

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

The idea behind California Software and The Investment Trust 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.