Correlation Between Cass Information and AZZ Incorporated

Can any of the company-specific risk be diversified away by investing in both Cass Information and AZZ Incorporated 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 Cass Information and AZZ Incorporated into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Cass Information Systems and AZZ Incorporated, you can compare the effects of market volatilities on Cass Information and AZZ Incorporated 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 Cass Information with a short position of AZZ Incorporated. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cass Information and AZZ Incorporated.

Diversification Opportunities for Cass Information and AZZ Incorporated

0.65

Correlation Coefficient

Cass Information  AZZ Incorporated

Poor diversification

The 3 months correlation between Cass and AZZ is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Cass Information Systems and AZZ Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AZZ Incorporated and Cass Information 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 Cass Information Systems are associated (or correlated) with AZZ Incorporated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AZZ Incorporated has no effect on the direction of Cass Information i.e., Cass Information and AZZ Incorporated go up and down completely randomly.

Pair Corralation between Cass Information and AZZ Incorporated

Given the investment horizon of 90 days Cass Information is expected to generate 1.16 times less return on investment than AZZ Incorporated. But when comparing it to its historical volatility, Cass Information Systems is 1.27 times less risky than AZZ Incorporated. It trades about 0.05 of its potential returns per unit of risk. AZZ Incorporated is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  8,316  in AZZ Incorporated on December 26, 2024 and sell it today you would earn a total of  330.00  from holding AZZ Incorporated or generate 3.97% return on investment over 90 days.

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

Cass Information Systems  vs.  AZZ Incorporated

Cass Information Systems

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Cass Information Systems are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Cass Information is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

AZZ Incorporated

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in AZZ Incorporated are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, AZZ Incorporated is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Cass Information and AZZ Incorporated

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

The idea behind Cass Information Systems and AZZ Incorporated 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.