Correlation Between Computershare and Flagship Investments

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

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

Diversification Opportunities for Computershare and Flagship Investments

0.79

Correlation Coefficient

Computershare  Flagship Investments

Poor diversification

The 3 months correlation between Computershare and Flagship is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Computershare and Flagship Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Flagship Investments and Computershare 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 Computershare are associated (or correlated) with Flagship Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Flagship Investments has no effect on the direction of Computershare i.e., Computershare and Flagship Investments go up and down completely randomly.

Pair Corralation between Computershare and Flagship Investments

Assuming the 90 days trading horizon Computershare is expected to generate 0.7 times more return on investment than Flagship Investments. However, Computershare is 1.44 times less risky than Flagship Investments. It trades about 0.16 of its potential returns per unit of risk. Flagship Investments is currently generating about -0.13 per unit of risk. If you would invest  3,340  in Computershare on October 8, 2024 and sell it today you would earn a total of  121.00  from holding Computershare or generate 3.62% return on investment over 90 days.

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

Computershare  vs.  Flagship Investments

Computershare

Risk-Adjusted Performance

26 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Computershare are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Computershare unveiled solid returns over the last few months and may actually be approaching a breakup point.

Flagship Investments

Risk-Adjusted Performance

6 of 100

Modest

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

Pair Trading with Computershare and Flagship Investments

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

The idea behind Computershare and Flagship Investments 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.

Check out your portfolio center.

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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.