Correlation Between Diligent Media and Compucom Software

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

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

Diversification Opportunities for Diligent Media and Compucom Software

0.48

Correlation Coefficient

Diligent Media  Compucom Software

Very weak diversification

The 3 months correlation between Diligent and Compucom is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Diligent Media and Compucom Software Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compucom Software and Diligent Media 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 Diligent Media 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 Diligent Media i.e., Diligent Media and Compucom Software go up and down completely randomly.

Pair Corralation between Diligent Media and Compucom Software

Assuming the 90 days trading horizon Diligent Media is expected to generate 0.89 times more return on investment than Compucom Software. However, Diligent Media is 1.13 times less risky than Compucom Software. It trades about 0.05 of its potential returns per unit of risk. Compucom Software Limited is currently generating about 0.04 per unit of risk. If you would invest  335.00  in Diligent Media on September 26, 2024 and sell it today you would earn a total of  278.00  from holding Diligent Media or generate 82.99% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.8%
Values	Daily Returns

Diligent Media  vs.  Compucom Software Limited

Diligent Media

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Diligent Media are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain fundamental indicators, Diligent Media demonstrated 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 unfluctuating 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 Diligent Media and Compucom Software

The main advantage of trading using opposite Diligent Media and Compucom Software positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Diligent Media 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 Diligent Media 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.