Correlation Between Computer Age and Power Mech

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

Diversification Opportunities for Computer Age and Power Mech

-0.41

Correlation Coefficient

Computer Age  Power Mech

Very good diversification

The 3 months correlation between Computer and Power is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Computer Age Management and Power Mech Projects in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Power Mech Projects 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 Power Mech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Power Mech Projects has no effect on the direction of Computer Age i.e., Computer Age and Power Mech go up and down completely randomly.

Pair Corralation between Computer Age and Power Mech

Assuming the 90 days trading horizon Computer Age is expected to generate 1.9 times less return on investment than Power Mech. But when comparing it to its historical volatility, Computer Age Management is 2.8 times less risky than Power Mech. It trades about 0.09 of its potential returns per unit of risk. Power Mech Projects is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  109,106  in Power Mech Projects on October 10, 2024 and sell it today you would earn a total of  176,339  from holding Power Mech Projects or generate 161.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.18%
Values	Daily Returns

Computer Age Management  vs.  Power Mech Projects

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 uncertain basic indicators, Computer Age may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Power Mech Projects

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Computer Age and Power Mech

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

The idea behind Computer Age Management and Power Mech Projects 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.