Correlation Between Computer Age and Cambridge Technology

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

Diversification Opportunities for Computer Age and Cambridge Technology

0.27

Correlation Coefficient

Computer Age  Cambridge Technology

Modest diversification

The 3 months correlation between Computer and Cambridge is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Computer Age Management and Cambridge Technology Enterpris in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cambridge Technology 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 Cambridge Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cambridge Technology has no effect on the direction of Computer Age i.e., Computer Age and Cambridge Technology go up and down completely randomly.

Pair Corralation between Computer Age and Cambridge Technology

Assuming the 90 days trading horizon Computer Age Management is expected to generate 0.63 times more return on investment than Cambridge Technology. However, Computer Age Management is 1.58 times less risky than Cambridge Technology. It trades about 0.11 of its potential returns per unit of risk. Cambridge Technology Enterprises is currently generating about 0.05 per unit of risk. If you would invest  218,055  in Computer Age Management on October 3, 2024 and sell it today you would earn a total of  289,485  from holding Computer Age Management or generate 132.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.73%
Values	Daily Returns

Computer Age Management  vs.  Cambridge Technology Enterpris

Computer Age Management

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Computer Age Management are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Computer Age unveiled solid returns over the last few months and may actually be approaching a breakup point.

Cambridge Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cambridge Technology Enterprises has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Cambridge Technology is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Computer Age and Cambridge Technology

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

The idea behind Computer Age Management and Cambridge Technology Enterprises 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.