Correlation Between CPU SOFTWAREHOUSE and SPORT LISBOA

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

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

Diversification Opportunities for CPU SOFTWAREHOUSE and SPORT LISBOA

-0.22

Correlation Coefficient

CPU SOFTWAREHOUSE  SPORT LISBOA

Very good diversification

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

Pair Corralation between CPU SOFTWAREHOUSE and SPORT LISBOA

Assuming the 90 days trading horizon CPU SOFTWAREHOUSE is expected to generate 3.18 times more return on investment than SPORT LISBOA. However, CPU SOFTWAREHOUSE is 3.18 times more volatile than SPORT LISBOA E. It trades about 0.07 of its potential returns per unit of risk. SPORT LISBOA E is currently generating about 0.05 per unit of risk. If you would invest  91.00  in CPU SOFTWAREHOUSE on November 20, 2024 and sell it today you would earn a total of  17.00  from holding CPU SOFTWAREHOUSE or generate 18.68% 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.  SPORT LISBOA E

CPU SOFTWAREHOUSE

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CPU SOFTWAREHOUSE are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical and fundamental indicators, CPU SOFTWAREHOUSE exhibited solid returns over the last few months and may actually be approaching a breakup point.

SPORT LISBOA E

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SPORT LISBOA E are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, SPORT LISBOA may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with CPU SOFTWAREHOUSE and SPORT LISBOA

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

The idea behind CPU SOFTWAREHOUSE and SPORT LISBOA E 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.