Correlation Between Converge Technology and Inovalis Real

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

By analyzing existing cross correlation between Converge Technology Solutions and Inovalis Real Estate, you can compare the effects of market volatilities on Converge Technology and Inovalis Real 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 Converge Technology with a short position of Inovalis Real. Check out your portfolio center. Please also check ongoing floating volatility patterns of Converge Technology and Inovalis Real.

Diversification Opportunities for Converge Technology and Inovalis Real

0.7

Correlation Coefficient

Converge Technology  Inovalis Real

Poor diversification

The 3 months correlation between Converge and Inovalis is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Converge Technology Solutions and Inovalis Real Estate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inovalis Real Estate and Converge 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 Converge Technology Solutions are associated (or correlated) with Inovalis Real. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inovalis Real Estate has no effect on the direction of Converge Technology i.e., Converge Technology and Inovalis Real go up and down completely randomly.

Pair Corralation between Converge Technology and Inovalis Real

Assuming the 90 days trading horizon Converge Technology Solutions is expected to generate 1.89 times more return on investment than Inovalis Real. However, Converge Technology is 1.89 times more volatile than Inovalis Real Estate. It trades about -0.08 of its potential returns per unit of risk. Inovalis Real Estate is currently generating about -0.23 per unit of risk. If you would invest  432.00  in Converge Technology Solutions on September 6, 2024 and sell it today you would lose (97.00) from holding Converge Technology Solutions or give up 22.45% of portfolio value over 90 days.

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

Converge Technology Solutions  vs.  Inovalis Real Estate

Converge Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Converge Technology Solutions 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 very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Inovalis Real Estate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Inovalis Real Estate has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Converge Technology and Inovalis Real

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

The idea behind Converge Technology Solutions and Inovalis Real Estate 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.