Correlation Between CPU SOFTWAREHOUSE and KRISPY KREME

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

By analyzing existing cross correlation between CPU SOFTWAREHOUSE and KRISPY KREME DL 01, you can compare the effects of market volatilities on CPU SOFTWAREHOUSE and KRISPY KREME 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 KRISPY KREME. Check out your portfolio center. Please also check ongoing floating volatility patterns of CPU SOFTWAREHOUSE and KRISPY KREME.

Diversification Opportunities for CPU SOFTWAREHOUSE and KRISPY KREME

-0.22

Correlation Coefficient

CPU SOFTWAREHOUSE  KRISPY KREME

Very good diversification

The 3 months correlation between CPU and KRISPY is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding CPU SOFTWAREHOUSE and KRISPY KREME DL 01 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KRISPY KREME DL 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 KRISPY KREME. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KRISPY KREME DL has no effect on the direction of CPU SOFTWAREHOUSE i.e., CPU SOFTWAREHOUSE and KRISPY KREME go up and down completely randomly.

Pair Corralation between CPU SOFTWAREHOUSE and KRISPY KREME

Assuming the 90 days trading horizon CPU SOFTWAREHOUSE is expected to generate 0.91 times more return on investment than KRISPY KREME. However, CPU SOFTWAREHOUSE is 1.1 times less risky than KRISPY KREME. It trades about 0.05 of its potential returns per unit of risk. KRISPY KREME DL 01 is currently generating about 0.03 per unit of risk. If you would invest  91.00  in CPU SOFTWAREHOUSE on September 3, 2024 and sell it today you would earn a total of  5.00  from holding CPU SOFTWAREHOUSE or generate 5.49% 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.  KRISPY KREME DL 01

CPU SOFTWAREHOUSE

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CPU SOFTWAREHOUSE are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, CPU SOFTWAREHOUSE may actually be approaching a critical reversion point that can send shares even higher in January 2025.

KRISPY KREME DL

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in KRISPY KREME DL 01 are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, KRISPY KREME is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with CPU SOFTWAREHOUSE and KRISPY KREME

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

The idea behind CPU SOFTWAREHOUSE and KRISPY KREME DL 01 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.