Correlation Between Fair Isaac and Pegasystems

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

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

Diversification Opportunities for Fair Isaac and Pegasystems

-0.1

Correlation Coefficient

Fair Isaac  Pegasystems

Good diversification

The 3 months correlation between Fair and Pegasystems is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Fair Isaac and Pegasystems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pegasystems and Fair Isaac 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 Fair Isaac are associated (or correlated) with Pegasystems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pegasystems has no effect on the direction of Fair Isaac i.e., Fair Isaac and Pegasystems go up and down completely randomly.

Pair Corralation between Fair Isaac and Pegasystems

Given the investment horizon of 90 days Fair Isaac is expected to under-perform the Pegasystems. But the stock apears to be less risky and, when comparing its historical volatility, Fair Isaac is 1.69 times less risky than Pegasystems. The stock trades about -0.2 of its potential returns per unit of risk. The Pegasystems is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest  9,494  in Pegasystems on November 29, 2024 and sell it today you would lose (1,607) from holding Pegasystems or give up 16.93% of portfolio value over 90 days.

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

Fair Isaac  vs.  Pegasystems

Fair Isaac

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fair Isaac has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental indicators remain very healthy which may send shares a bit higher in March 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pegasystems

Risk-Adjusted Performance

Very Weak

Over the last 90 days Pegasystems has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's technical and fundamental indicators remain somewhat strong which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Fair Isaac and Pegasystems

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

The idea behind Fair Isaac and Pegasystems 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.