Correlation Between Cass Information and Thomson Reuters

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

Diversification Opportunities for Cass Information and Thomson Reuters

0.85

Correlation Coefficient

Cass Information  Thomson Reuters

Very poor diversification

The 3 months correlation between Cass and Thomson is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Cass Information Systems and Thomson Reuters in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thomson Reuters 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 Thomson Reuters. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thomson Reuters has no effect on the direction of Cass Information i.e., Cass Information and Thomson Reuters go up and down completely randomly.

Pair Corralation between Cass Information and Thomson Reuters

Given the investment horizon of 90 days Cass Information is expected to generate 1.05 times less return on investment than Thomson Reuters. In addition to that, Cass Information is 1.23 times more volatile than Thomson Reuters. It trades about 0.08 of its total potential returns per unit of risk. Thomson Reuters is currently generating about 0.1 per unit of volatility. If you would invest  16,054  in Thomson Reuters on December 28, 2024 and sell it today you would earn a total of  1,214  from holding Thomson Reuters or generate 7.56% return on investment over 90 days.

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

Cass Information Systems  vs.  Thomson Reuters

Cass Information Systems

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Cass Information Systems are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Cass Information may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Thomson Reuters

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Thomson Reuters are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating basic indicators, Thomson Reuters may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Cass Information and Thomson Reuters

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

The idea behind Cass Information Systems and Thomson Reuters 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.