Correlation Between Easy Software and Shenzhen Investment

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

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

Diversification Opportunities for Easy Software and Shenzhen Investment

0.27

Correlation Coefficient

Easy Software  Shenzhen Investment

Modest diversification

The 3 months correlation between Easy and Shenzhen is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Easy Software AG and Shenzhen Investment Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenzhen Investment and Easy Software 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 Easy Software AG are associated (or correlated) with Shenzhen Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shenzhen Investment has no effect on the direction of Easy Software i.e., Easy Software and Shenzhen Investment go up and down completely randomly.

Pair Corralation between Easy Software and Shenzhen Investment

Assuming the 90 days trading horizon Easy Software AG is expected to generate 0.36 times more return on investment than Shenzhen Investment. However, Easy Software AG is 2.82 times less risky than Shenzhen Investment. It trades about -0.02 of its potential returns per unit of risk. Shenzhen Investment Limited is currently generating about -0.01 per unit of risk. If you would invest  1,890  in Easy Software AG on December 20, 2024 and sell it today you would lose (70.00) from holding Easy Software AG or give up 3.7% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.33%
Values	Daily Returns

Easy Software AG  vs.  Shenzhen Investment Limited

Easy Software AG

Risk-Adjusted Performance

Very Weak

Over the last 90 days Easy Software AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Easy Software is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Shenzhen Investment

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Easy Software and Shenzhen Investment

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

The idea behind Easy Software AG and Shenzhen Investment 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.

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