Correlation Between Dassault Systèmes and NetSol Technologies

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

By analyzing existing cross correlation between Dassault Systmes SE and NetSol Technologies, you can compare the effects of market volatilities on Dassault Systèmes and NetSol Technologies 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 Dassault Systèmes with a short position of NetSol Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dassault Systèmes and NetSol Technologies.

Diversification Opportunities for Dassault Systèmes and NetSol Technologies

-0.18

Correlation Coefficient

Dassault Systèmes  NetSol Technologies

Good diversification

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

Pair Corralation between Dassault Systèmes and NetSol Technologies

Assuming the 90 days horizon Dassault Systmes SE is expected to generate 0.73 times more return on investment than NetSol Technologies. However, Dassault Systmes SE is 1.38 times less risky than NetSol Technologies. It trades about 0.05 of its potential returns per unit of risk. NetSol Technologies is currently generating about -0.06 per unit of risk. If you would invest  3,280  in Dassault Systmes SE on October 23, 2024 and sell it today you would earn a total of  140.00  from holding Dassault Systmes SE or generate 4.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Dassault Systmes SE  vs.  NetSol Technologies

Dassault Systèmes

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Dassault Systmes SE are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Dassault Systèmes is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

NetSol Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NetSol Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Dassault Systèmes and NetSol Technologies

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

The idea behind Dassault Systmes SE and NetSol Technologies 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.