Correlation Between CRA International and Information Services

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

By analyzing existing cross correlation between CRA International and Information Services Group, you can compare the effects of market volatilities on CRA International and Information Services 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 Information Services. Check out your portfolio center. Please also check ongoing floating volatility patterns of CRA International and Information Services.

Diversification Opportunities for CRA International and Information Services

-0.6

Correlation Coefficient

CRA International  Information Services

Excellent diversification

The 3 months correlation between CRA and Information is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding CRA International and Information Services Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Information Services 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 Information Services. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Information Services has no effect on the direction of CRA International i.e., CRA International and Information Services go up and down completely randomly.

Pair Corralation between CRA International and Information Services

Given the investment horizon of 90 days CRA International is expected to under-perform the Information Services. But the stock apears to be less risky and, when comparing its historical volatility, CRA International is 1.02 times less risky than Information Services. The stock trades about -0.03 of its potential returns per unit of risk. The Information Services Group is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  330.00  in Information Services Group on December 29, 2024 and sell it today you would earn a total of  70.00  from holding Information Services Group or generate 21.21% return on investment over 90 days.

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

CRA International  vs.  Information Services Group

CRA International

Risk-Adjusted Performance

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 latest stock price confusion, may contribute to short-horizon losses for the traders.

Information Services

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Information Services Group are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak forward indicators, Information Services demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CRA International and Information Services

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

The idea behind CRA International and Information Services Group 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.