Correlation Between National Retail and PSI Software

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

By analyzing existing cross correlation between National Retail Properties and PSI Software AG, you can compare the effects of market volatilities on National Retail and PSI Software 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 National Retail with a short position of PSI Software. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Retail and PSI Software.

Diversification Opportunities for National Retail and PSI Software

0.83

Correlation Coefficient

National Retail  PSI Software

Very poor diversification

The 3 months correlation between National and PSI is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding National Retail Properties and PSI Software AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PSI Software AG and National Retail 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 National Retail Properties are associated (or correlated) with PSI Software. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PSI Software AG has no effect on the direction of National Retail i.e., National Retail and PSI Software go up and down completely randomly.

Pair Corralation between National Retail and PSI Software

Assuming the 90 days trading horizon National Retail Properties is expected to under-perform the PSI Software. In addition to that, National Retail is 1.46 times more volatile than PSI Software AG. It trades about -0.09 of its total potential returns per unit of risk. PSI Software AG is currently generating about -0.05 per unit of volatility. If you would invest  2,200  in PSI Software AG on October 8, 2024 and sell it today you would lose (80.00) from holding PSI Software AG or give up 3.64% of portfolio value over 90 days.

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

National Retail Properties  vs.  PSI Software AG

National Retail Prop

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days National Retail Properties has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

PSI Software AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PSI Software AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, PSI Software is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with National Retail and PSI Software

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

The idea behind National Retail Properties and PSI Software AG 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.