Correlation Between EMBASSY OFFICE and Cambridge Technology

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

By analyzing existing cross correlation between EMBASSY OFFICE PARKS and Cambridge Technology Enterprises, you can compare the effects of market volatilities on EMBASSY OFFICE and Cambridge Technology 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 EMBASSY OFFICE with a short position of Cambridge Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of EMBASSY OFFICE and Cambridge Technology.

Diversification Opportunities for EMBASSY OFFICE and Cambridge Technology

-0.06

Correlation Coefficient

EMBASSY OFFICE  Cambridge Technology

Good diversification

The 3 months correlation between EMBASSY and Cambridge is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding EMBASSY OFFICE PARKS and Cambridge Technology Enterpris in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cambridge Technology and EMBASSY OFFICE 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 EMBASSY OFFICE PARKS are associated (or correlated) with Cambridge Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cambridge Technology has no effect on the direction of EMBASSY OFFICE i.e., EMBASSY OFFICE and Cambridge Technology go up and down completely randomly.

Pair Corralation between EMBASSY OFFICE and Cambridge Technology

Assuming the 90 days trading horizon EMBASSY OFFICE is expected to generate 10.12 times less return on investment than Cambridge Technology. But when comparing it to its historical volatility, EMBASSY OFFICE PARKS is 2.05 times less risky than Cambridge Technology. It trades about 0.03 of its potential returns per unit of risk. Cambridge Technology Enterprises is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  10,533  in Cambridge Technology Enterprises on October 8, 2024 and sell it today you would earn a total of  855.00  from holding Cambridge Technology Enterprises or generate 8.12% return on investment over 90 days.

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

EMBASSY OFFICE PARKS  vs.  Cambridge Technology Enterpris

EMBASSY OFFICE PARKS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EMBASSY OFFICE PARKS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, EMBASSY OFFICE is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Cambridge Technology

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Cambridge Technology Enterprises are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Cambridge Technology may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with EMBASSY OFFICE and Cambridge Technology

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

The idea behind EMBASSY OFFICE PARKS and Cambridge Technology Enterprises 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.