Correlation Between Computer Age and Data Patterns

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

Diversification Opportunities for Computer Age and Data Patterns

0.79

Correlation Coefficient

Computer Age  Data Patterns

Poor diversification

The 3 months correlation between Computer and Data is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Computer Age Management and Data Patterns Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Data Patterns Limited 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 Data Patterns. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Data Patterns Limited has no effect on the direction of Computer Age i.e., Computer Age and Data Patterns go up and down completely randomly.

Pair Corralation between Computer Age and Data Patterns

Assuming the 90 days trading horizon Computer Age Management is expected to generate 0.94 times more return on investment than Data Patterns. However, Computer Age Management is 1.06 times less risky than Data Patterns. It trades about 0.11 of its potential returns per unit of risk. Data Patterns Limited is currently generating about -0.07 per unit of risk. If you would invest  374,136  in Computer Age Management on October 4, 2024 and sell it today you would earn a total of  133,404  from holding Computer Age Management or generate 35.66% return on investment over 90 days.

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

Computer Age Management  vs.  Data Patterns Limited

Computer Age Management

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Computer Age Management are ranked lower than 11 (%) 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.

Data Patterns Limited

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Data Patterns Limited are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Data Patterns may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Computer Age and Data Patterns

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

The idea behind Computer Age Management and Data Patterns Limited 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.