Correlation Between CSP and Innodata

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

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

Diversification Opportunities for CSP and Innodata

0.03

Correlation Coefficient

CSP  Innodata

Significant diversification

The 3 months correlation between CSP and Innodata is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding CSP Inc and Innodata in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innodata and CSP 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 CSP Inc are associated (or correlated) with Innodata. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innodata has no effect on the direction of CSP i.e., CSP and Innodata go up and down completely randomly.

Pair Corralation between CSP and Innodata

Given the investment horizon of 90 days CSP is expected to generate 3.83 times less return on investment than Innodata. But when comparing it to its historical volatility, CSP Inc is 1.35 times less risky than Innodata. It trades about 0.03 of its potential returns per unit of risk. Innodata is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  4,052  in Innodata on December 1, 2024 and sell it today you would earn a total of  1,220  from holding Innodata or generate 30.11% return on investment over 90 days.

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

CSP Inc  vs.  Innodata

CSP Inc

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CSP Inc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly fragile basic indicators, CSP may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Innodata

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Innodata are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, Innodata exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CSP and Innodata

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

The idea behind CSP Inc and Innodata 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.