Correlation Between CRA International and Development Technologies

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

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

Diversification Opportunities for CRA International and Development Technologies

-0.4

Correlation Coefficient

CRA International  Development Technologies

Very good diversification

The 3 months correlation between CRA and Development is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding CRA International and Development Technologies Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Development Technologies and CRA International 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 CRA International are associated (or correlated) with Development Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Development Technologies has no effect on the direction of CRA International i.e., CRA International and Development Technologies go up and down completely randomly.

Pair Corralation between CRA International and Development Technologies

Given the investment horizon of 90 days CRA International is expected to under-perform the Development Technologies. But the stock apears to be less risky and, when comparing its historical volatility, CRA International is 3.72 times less risky than Development Technologies. The stock trades about -0.13 of its potential returns per unit of risk. The Development Technologies Corp is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  625.00  in Development Technologies Corp on October 14, 2024 and sell it today you would earn a total of  275.00  from holding Development Technologies Corp or generate 44.0% return on investment over 90 days.

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

CRA International  vs.  Development Technologies Corp

CRA International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CRA International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, CRA International is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Development Technologies

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Development Technologies Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, Development Technologies exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CRA International and Development Technologies

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

The idea behind CRA International and Development Technologies Corp 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.