Correlation Between Now and Pulse Seismic

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

By analyzing existing cross correlation between Now Inc and Pulse Seismic, you can compare the effects of market volatilities on Now and Pulse Seismic 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 Pulse Seismic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Now and Pulse Seismic.

Diversification Opportunities for Now and Pulse Seismic

-0.21

Correlation Coefficient

Now  Pulse Seismic

Very good diversification

The 3 months correlation between Now and Pulse is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Now Inc and Pulse Seismic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pulse Seismic 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 Pulse Seismic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pulse Seismic has no effect on the direction of Now i.e., Now and Pulse Seismic go up and down completely randomly.

Pair Corralation between Now and Pulse Seismic

Given the investment horizon of 90 days Now Inc is expected to under-perform the Pulse Seismic. But the stock apears to be less risky and, when comparing its historical volatility, Now Inc is 2.29 times less risky than Pulse Seismic. The stock trades about -0.5 of its potential returns per unit of risk. The Pulse Seismic is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  161.00  in Pulse Seismic on October 6, 2024 and sell it today you would earn a total of  2.00  from holding Pulse Seismic or generate 1.24% return on investment over 90 days.

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

Now Inc  vs.  Pulse Seismic

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.

Pulse Seismic

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pulse Seismic has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, Pulse Seismic is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Now and Pulse Seismic

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

The idea behind Now Inc and Pulse Seismic 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.

Check out your portfolio center.

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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.