Correlation Between CPU SOFTWAREHOUSE and Traton SE

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

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

Diversification Opportunities for CPU SOFTWAREHOUSE and Traton SE

-0.3

Correlation Coefficient

CPU SOFTWAREHOUSE  Traton SE

Very good diversification

The 3 months correlation between CPU and Traton is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding CPU SOFTWAREHOUSE and Traton SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Traton SE and CPU SOFTWAREHOUSE 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 CPU SOFTWAREHOUSE are associated (or correlated) with Traton SE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Traton SE has no effect on the direction of CPU SOFTWAREHOUSE i.e., CPU SOFTWAREHOUSE and Traton SE go up and down completely randomly.

Pair Corralation between CPU SOFTWAREHOUSE and Traton SE

Assuming the 90 days trading horizon CPU SOFTWAREHOUSE is expected to under-perform the Traton SE. In addition to that, CPU SOFTWAREHOUSE is 2.0 times more volatile than Traton SE. It trades about -0.05 of its total potential returns per unit of risk. Traton SE is currently generating about 0.08 per unit of volatility. If you would invest  2,830  in Traton SE on September 14, 2024 and sell it today you would earn a total of  270.00  from holding Traton SE or generate 9.54% return on investment over 90 days.

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

CPU SOFTWAREHOUSE  vs.  Traton SE

CPU SOFTWAREHOUSE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CPU SOFTWAREHOUSE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Traton SE

Risk-Adjusted Performance

6 of 100

Modest

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

Pair Trading with CPU SOFTWAREHOUSE and Traton SE

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

The idea behind CPU SOFTWAREHOUSE and Traton 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.