Correlation Between Computer Modelling and Fjordland Exploration

Can any of the company-specific risk be diversified away by investing in both Computer Modelling and Fjordland Exploration 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 Modelling and Fjordland Exploration into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Computer Modelling Group and Fjordland Exploration, you can compare the effects of market volatilities on Computer Modelling and Fjordland Exploration 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 Modelling with a short position of Fjordland Exploration. Check out your portfolio center. Please also check ongoing floating volatility patterns of Computer Modelling and Fjordland Exploration.

Diversification Opportunities for Computer Modelling and Fjordland Exploration

0.39

Correlation Coefficient

Computer Modelling  Fjordland Exploration

Weak diversification

The 3 months correlation between Computer and Fjordland is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Computer Modelling Group and Fjordland Exploration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fjordland Exploration and Computer Modelling 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 Modelling Group are associated (or correlated) with Fjordland Exploration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fjordland Exploration has no effect on the direction of Computer Modelling i.e., Computer Modelling and Fjordland Exploration go up and down completely randomly.

Pair Corralation between Computer Modelling and Fjordland Exploration

Assuming the 90 days trading horizon Computer Modelling is expected to generate 4.1 times less return on investment than Fjordland Exploration. But when comparing it to its historical volatility, Computer Modelling Group is 5.8 times less risky than Fjordland Exploration. It trades about 0.05 of its potential returns per unit of risk. Fjordland Exploration is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  5.00  in Fjordland Exploration on October 25, 2024 and sell it today you would lose (4.00) from holding Fjordland Exploration or give up 80.0% of portfolio value over 90 days.

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

Computer Modelling Group  vs.  Fjordland Exploration

Computer Modelling

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Computer Modelling Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's technical and fundamental indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Fjordland Exploration

Risk-Adjusted Performance

0 of 100

Modest

Over the last 90 days Fjordland Exploration has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Fjordland Exploration is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Computer Modelling and Fjordland Exploration

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

The idea behind Computer Modelling Group and Fjordland Exploration 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.