Correlation Between Computer Age and Byke Hospitality

Can any of the company-specific risk be diversified away by investing in both Computer Age and Byke Hospitality 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 Computer Age and Byke Hospitality into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Computer Age Management and The Byke Hospitality, you can compare the effects of market volatilities on Computer Age and Byke Hospitality 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 Computer Age with a short position of Byke Hospitality. Check out your portfolio center. Please also check ongoing floating volatility patterns of Computer Age and Byke Hospitality.

Diversification Opportunities for Computer Age and Byke Hospitality

0.78

Correlation Coefficient

Computer Age  Byke Hospitality

Poor diversification

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

Pair Corralation between Computer Age and Byke Hospitality

Assuming the 90 days trading horizon Computer Age Management is expected to generate 0.83 times more return on investment than Byke Hospitality. However, Computer Age Management is 1.21 times less risky than Byke Hospitality. It trades about 0.12 of its potential returns per unit of risk. The Byke Hospitality is currently generating about 0.06 per unit of risk. If you would invest  266,801  in Computer Age Management on October 5, 2024 and sell it today you would earn a total of  253,529  from holding Computer Age Management or generate 95.03% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.62%
Values	Daily Returns

Computer Age Management  vs.  The Byke Hospitality

Computer Age Management

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Computer Age Management are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Computer Age unveiled solid returns over the last few months and may actually be approaching a breakup point.

Byke Hospitality

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in The Byke Hospitality are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Byke Hospitality unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Computer Age and Byke Hospitality

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

The idea behind Computer Age Management and The Byke Hospitality 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.