Correlation Between Computer Age and California Software

Can any of the company-specific risk be diversified away by investing in both Computer Age and California 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 Computer Age and California Software 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 California Software, you can compare the effects of market volatilities on Computer Age and California 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 Computer Age with a short position of California Software. Check out your portfolio center. Please also check ongoing floating volatility patterns of Computer Age and California Software.

Diversification Opportunities for Computer Age and California Software

-0.37

Correlation Coefficient

Computer Age  California Software

Very good diversification

The 3 months correlation between Computer and California is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Computer Age Management and California Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on California Software 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 California Software. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of California Software has no effect on the direction of Computer Age i.e., Computer Age and California Software go up and down completely randomly.

Pair Corralation between Computer Age and California Software

Assuming the 90 days trading horizon Computer Age Management is expected to generate 0.73 times more return on investment than California Software. However, Computer Age Management is 1.38 times less risky than California Software. It trades about 0.08 of its potential returns per unit of risk. California Software is currently generating about -0.04 per unit of risk. If you would invest  440,436  in Computer Age Management on August 31, 2024 and sell it today you would earn a total of  48,899  from holding Computer Age Management or generate 11.1% return on investment over 90 days.

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

Computer Age Management  vs.  California Software

Computer Age Management

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Computer Age Management are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Computer Age may actually be approaching a critical reversion point that can send shares even higher in December 2024.

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 latest fragile performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Computer Age and California Software

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

The idea behind Computer Age Management and California 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.