Correlation Between Cass Information and DATAGROUP

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

Diversification Opportunities for Cass Information and DATAGROUP

0.27

Correlation Coefficient

Cass Information  DATAGROUP

Modest diversification

The 3 months correlation between Cass and DATAGROUP is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Cass Information Systems and DATAGROUP SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DATAGROUP SE 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 DATAGROUP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DATAGROUP SE has no effect on the direction of Cass Information i.e., Cass Information and DATAGROUP go up and down completely randomly.

Pair Corralation between Cass Information and DATAGROUP

Assuming the 90 days horizon Cass Information is expected to generate 1.08 times less return on investment than DATAGROUP. But when comparing it to its historical volatility, Cass Information Systems is 1.39 times less risky than DATAGROUP. It trades about 0.07 of its potential returns per unit of risk. DATAGROUP SE is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  4,370  in DATAGROUP SE on October 5, 2024 and sell it today you would earn a total of  310.00  from holding DATAGROUP SE or generate 7.09% return on investment over 90 days.

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

Cass Information Systems  vs.  DATAGROUP SE

Cass Information Systems

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days Cass Information Systems has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile basic indicators, Cass Information may actually be approaching a critical reversion point that can send shares even higher in February 2025.

DATAGROUP SE

Risk-Adjusted Performance

0 of 100

Insignificant

Over the last 90 days DATAGROUP SE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively fragile technical indicators, DATAGROUP may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Cass Information and DATAGROUP

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

The idea behind Cass Information Systems and DATAGROUP SE 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.