Correlation Between Cass Information and NEW MILLENNIUM

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

Diversification Opportunities for Cass Information and NEW MILLENNIUM

-0.48

Correlation Coefficient

Cass Information  NEW MILLENNIUM

Very good diversification

The 3 months correlation between Cass and NEW is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Cass Information Systems and NEW MILLENNIUM IRON in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NEW MILLENNIUM IRON 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 NEW MILLENNIUM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NEW MILLENNIUM IRON has no effect on the direction of Cass Information i.e., Cass Information and NEW MILLENNIUM go up and down completely randomly.

Pair Corralation between Cass Information and NEW MILLENNIUM

Assuming the 90 days horizon Cass Information Systems is expected to generate 0.69 times more return on investment than NEW MILLENNIUM. However, Cass Information Systems is 1.45 times less risky than NEW MILLENNIUM. It trades about -0.01 of its potential returns per unit of risk. NEW MILLENNIUM IRON is currently generating about -0.08 per unit of risk. If you would invest  3,992  in Cass Information Systems on December 19, 2024 and sell it today you would lose (72.00) from holding Cass Information Systems or give up 1.8% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Cass Information Systems  vs.  NEW MILLENNIUM IRON

Cass Information Systems

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cass Information Systems has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Cass Information is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

NEW MILLENNIUM IRON

Risk-Adjusted Performance

Very Weak

Over the last 90 days NEW MILLENNIUM IRON has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Cass Information and NEW MILLENNIUM

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

The idea behind Cass Information Systems and NEW MILLENNIUM IRON 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.