Correlation Between Cambridge Technology and R S

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

By analyzing existing cross correlation between Cambridge Technology Enterprises and R S Software, you can compare the effects of market volatilities on Cambridge Technology and R S 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 Cambridge Technology with a short position of R S. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cambridge Technology and R S.

Diversification Opportunities for Cambridge Technology and R S

0.67

Correlation Coefficient

Cambridge Technology  R S

Poor diversification

The 3 months correlation between Cambridge and RSSOFTWARE is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Cambridge Technology Enterpris and R S Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on R S Software and Cambridge Technology 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 Cambridge Technology Enterprises are associated (or correlated) with R S. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of R S Software has no effect on the direction of Cambridge Technology i.e., Cambridge Technology and R S go up and down completely randomly.

Pair Corralation between Cambridge Technology and R S

Assuming the 90 days trading horizon Cambridge Technology Enterprises is expected to generate 0.65 times more return on investment than R S. However, Cambridge Technology Enterprises is 1.55 times less risky than R S. It trades about -0.17 of its potential returns per unit of risk. R S Software is currently generating about -0.14 per unit of risk. If you would invest  10,761  in Cambridge Technology Enterprises on August 31, 2024 and sell it today you would lose (2,179) from holding Cambridge Technology Enterprises or give up 20.25% of portfolio value over 90 days.

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

Cambridge Technology Enterpris  vs.  R S Software

Cambridge Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cambridge Technology Enterprises has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in December 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

R S Software

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days R S Software has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in December 2024. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Cambridge Technology and R S

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

The idea behind Cambridge Technology Enterprises and R S Software 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.