Correlation Between Now and Distribution Solutions

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

By analyzing existing cross correlation between Now Inc and Distribution Solutions Group, you can compare the effects of market volatilities on Now and Distribution Solutions 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 Now with a short position of Distribution Solutions. Check out your portfolio center. Please also check ongoing floating volatility patterns of Now and Distribution Solutions.

Diversification Opportunities for Now and Distribution Solutions

0.25

Correlation Coefficient

Now  Distribution Solutions

Modest diversification

The 3 months correlation between Now and Distribution is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Now Inc and Distribution Solutions Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Distribution Solutions and Now 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 Now Inc are associated (or correlated) with Distribution Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Distribution Solutions has no effect on the direction of Now i.e., Now and Distribution Solutions go up and down completely randomly.

Pair Corralation between Now and Distribution Solutions

Given the investment horizon of 90 days Now Inc is expected to generate 0.66 times more return on investment than Distribution Solutions. However, Now Inc is 1.5 times less risky than Distribution Solutions. It trades about -0.44 of its potential returns per unit of risk. Distribution Solutions Group is currently generating about -0.45 per unit of risk. If you would invest  1,427  in Now Inc on October 15, 2024 and sell it today you would lose (144.00) from holding Now Inc or give up 10.09% of portfolio value over 90 days.

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

Now Inc  vs.  Distribution Solutions Group

Now Inc

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Now Inc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Now is not utilizing all of its potentials. The newest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Distribution Solutions

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Distribution Solutions Group has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unsteady performance in the last few months, the Stock's technical and fundamental indicators remain relatively invariable which may send shares a bit higher in February 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Now and Distribution Solutions

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

The idea behind Now Inc and Distribution Solutions Group 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 Transaction History module to view history of all your transactions and understand their impact on performance.