Correlation Between Delta Manufacturing and Compucom Software

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

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

Diversification Opportunities for Delta Manufacturing and Compucom Software

0.18

Correlation Coefficient

Delta Manufacturing  Compucom Software

Average diversification

The 3 months correlation between Delta and Compucom is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Delta Manufacturing Limited and Compucom Software Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compucom Software and Delta Manufacturing 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 Delta Manufacturing Limited are associated (or correlated) with Compucom Software. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compucom Software has no effect on the direction of Delta Manufacturing i.e., Delta Manufacturing and Compucom Software go up and down completely randomly.

Pair Corralation between Delta Manufacturing and Compucom Software

Assuming the 90 days trading horizon Delta Manufacturing is expected to generate 1.14 times less return on investment than Compucom Software. But when comparing it to its historical volatility, Delta Manufacturing Limited is 1.07 times less risky than Compucom Software. It trades about 0.04 of its potential returns per unit of risk. Compucom Software Limited is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,739  in Compucom Software Limited on October 25, 2024 and sell it today you would earn a total of  788.00  from holding Compucom Software Limited or generate 45.31% return on investment over 90 days.

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

Delta Manufacturing Limited  vs.  Compucom Software Limited

Delta Manufacturing

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Delta Manufacturing Limited are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, Delta Manufacturing sustained solid returns over the last few months and may actually be approaching a breakup point.

Compucom Software

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Compucom Software Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Delta Manufacturing and Compucom Software

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

The idea behind Delta Manufacturing Limited and Compucom Software Limited 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.